ERII Collar Strategy
ERII (Energy Recovery, Inc.), in the Industrials sector, (Industrial - Pollution & Treatment Controls industry), listed on NASDAQ.
Energy Recovery, Inc., together with its subsidiaries, designs, manufactures, and sells various solutions for the seawater reverse osmosis desalination and industrial wastewater treatment industries worldwide. The company operates through Water and Emerging Technologies segments. It offers a suite of products, including energy recovery devices, and high-pressure feed and recirculation pumps; hydraulic turbochargers and boosters; and spare parts, as well as repair, field, and commissioning services. The company also offers a solution to reduce energy consumption in natural gas processing and in refrigeration systems that use carbon dioxide. It provides its products under the ERI, Ultra PX, PX, Pressure Exchanger, PX Pressure Exchanger, PX PowerTrain, VorTeq, IsoBoost, AT, and AquaBold names to large engineering, procurement, and construction firms; end-users and industry consultants; original equipment manufacturers; and aftermarket customers. The company was incorporated in 1992 and is headquartered in San Leandro, California.
ERII (Energy Recovery, Inc.) trades in the Industrials sector, specifically Industrial - Pollution & Treatment Controls, with a market capitalization of approximately $428.3M, a trailing P/E of 21.25, a beta of 1.04 versus the broader market, a 52-week range of 8.135-18.32, average daily share volume of 972K, a public-listing history dating back to 2008, approximately 254 full-time employees. These structural characteristics shape how ERII stock options price implied volatility around earnings windows, capital events, and macro-driven sector rotations.
A beta of 1.04 places ERII roughly in line with broader market moves, so the strategy payoff and realized volatility track the index-equivalent baseline.
What is a collar on ERII?
A collar pairs long stock with a protective out-of-the-money put financed by a short out-of-the-money call, capping both tails of the position around the current spot.
Current ERII snapshot
As of May 15, 2026, spot at $8.39, ATM IV 42.20%, IV rank 18.28%, expected move 12.10%. The collar on ERII below is built from the same end-of-day chain, with strikes snapped to listed contracts and premiums pulled from the bid/ask midpoint at a 34-day expiry.
Why this collar structure on ERII specifically: IV regime affects collar pricing on both sides; compressed ERII IV at 42.20% typically pushes the short call premium to roughly offset the long put cost, with a market-implied 1-standard-deviation move of approximately 12.10% (roughly $1.02 on the underlying). The 34-day window matched to the front-month expiry keeps theta exposure bounded while still capturing the post-snapshot move; longer-dated ERII expiries trade a higher absolute premium for lower per-day decay. Position sizing on ERII should anchor to the underlying notional of $8.39 per share and to the trader's directional view on ERII stock.
ERII collar setup
The ERII collar below is built from the end-of-day chain, with each option leg priced at the bid/ask midpoint of its listed strike. With ERII near $8.39, the first option leg uses a $8.81 strike; additional legs (when the strategy has them) anchor to spot-relative offsets. Premiums come from the bid/ask midpoint on the listed ERII chain at a 34-day expiry; the cross-strike IV skew is reflected directly in the per-leg values rather than approximated. Quantity sizing assumes one contract per option leg (or 100 ERII shares for the stock leg in covered calls and collars).
| Action | Type | Strike / Basis | Premium (est) |
|---|---|---|---|
| Buy 100 shares | Stock | $8.39 | long |
| Sell 1 | Call | $8.81 | N/A |
| Buy 1 | Put | $7.97 | N/A |
ERII collar risk and reward
- Net Premium / Debit
- N/A
- Max Profit (per contract)
- Unbounded
- Max Loss (per contract)
- Unbounded
- Breakeven(s)
- None on modeled curve
- Risk / Reward Ratio
- N/A
Max profit roughly equals short-call strike minus cost basis plus net premium; max loss roughly equals cost basis minus long-put strike minus net premium. Breakeven shifts by the net premium.
ERII collar payoff curve
Modeled P&L at expiration across a range of underlying prices for the collar on ERII. Each row is one sampled price point from the computed payoff curve; the full curve uses 200 price points internally before being summarized into 10 rows here.
When traders use collar on ERII
Collars on ERII hedge an existing long ERII stock position; the long put sets a floor while the short call finances it, often run as a near-zero-cost hedge during expected volatility windows.
ERII thesis for this collar
The market-implied 1-standard-deviation range for ERII extends from approximately $7.37 on the downside to $9.41 on the upside. A ERII collar hedges an existing long ERII position with a protective put while financing the put cost via a short call; when the premiums roughly offset, the collar acts as a near-zero-cost insurance band around the current spot. Current ERII IV rank near 18.28% sits in the lower third of its 1-year distribution, where IV often re-expands toward the mean; this favors premium-buying structures and disadvantages premium-selling structures on ERII at 42.20%. As a Industrials name, ERII options can move on sector-level news flow (peer earnings, regulatory updates, industry-specific macro data) in addition to ERII-specific events.
ERII collar positions are structurally neutral (protective); the modeled P&L assumes European-style exercise at expiration and ignores early assignment, transaction costs, dividends paid before expiry on the stock leg (when present), and the bid-ask spread on the listed chain. ERII positions also carry Industrials sector concentration risk; news flow inside the sector (peer earnings, regulatory shifts, supply-chain headlines) can move ERII alongside the broader basket even when ERII-specific fundamentals are unchanged. Always rebuild the position from current ERII chain quotes before placing a trade.
Frequently asked questions
- What is a collar on ERII?
- A collar on ERII is the collar strategy applied to ERII (stock). The strategy is structurally neutral (protective): A collar pairs long stock with a protective out-of-the-money put financed by a short out-of-the-money call, capping both tails of the position around the current spot. With ERII stock trading near $8.39, the strikes shown on this page are snapped to the nearest listed ERII chain strike and the premiums come straight from the end-of-day bid/ask midpoint.
- How are ERII collar max profit and max loss calculated?
- Max profit roughly equals short-call strike minus cost basis plus net premium; max loss roughly equals cost basis minus long-put strike minus net premium. Breakeven shifts by the net premium. For the ERII collar priced from the end-of-day chain at a 30-day expiry (ATM IV 42.20%), the computed maximum profit is unbounded per contract and the computed maximum loss is unbounded per contract. Live intraday quotes will differ as the chain moves through the trading session.
- What is the breakeven for a ERII collar?
- The breakeven for the ERII collar priced on this page is no defined breakeven on the modeled curve at expiration, derived from end-of-day chain premiums. Breakeven is the underlying price at which the strategy's P&L crosses zero ignoring transaction costs and assignment risk. The current ERII market-implied 1-standard-deviation expected move is approximately 12.10%; if the move sits well outside the breakeven distance, the structure's risk-reward becomes correspondingly tighter.
- When should you consider a collar on ERII?
- Collars on ERII hedge an existing long ERII stock position; the long put sets a floor while the short call finances it, often run as a near-zero-cost hedge during expected volatility windows.
- How does current ERII implied volatility affect this collar?
- ERII ATM IV is at 42.20% with IV rank near 18.28%, which is on the low end of its 1-year range. Premium-buying structures (long call, long put, debit spreads) are relatively cheap in this regime; premium-selling structures collect less credit per unit risk.