LOCO Collar Strategy
LOCO (El Pollo Loco Holdings, Inc.), in the Consumer Cyclical sector, (Restaurants industry), listed on NASDAQ.
El Pollo Loco Holdings, Inc., through its subsidiary, El Pollo Loco, Inc., develops, franchises, licenses, and operates quick-service restaurants under the El Pollo Loco name. As of May 04, 2022, the company operated 480 restaurants comprising 189 company-operated and 291 franchised restaurants located in California, Nevada, Arizona, Texas, Utah, and Louisiana. It also licenses one restaurant in the Philippines. The company was formerly known as Chicken Acquisition Corp. and changed its name to El Pollo Loco Holdings, Inc. in April 2014. El Pollo Loco Holdings, Inc. was founded in 1975 and is headquartered in Costa Mesa, California.
LOCO (El Pollo Loco Holdings, Inc.) trades in the Consumer Cyclical sector, specifically Restaurants, with a market capitalization of approximately $400.2M, a trailing P/E of 13.25, a beta of 0.70 versus the broader market, a 52-week range of 8.87-15.9, average daily share volume of 323K, a public-listing history dating back to 2014, approximately 4K full-time employees. These structural characteristics shape how LOCO stock options price implied volatility around earnings windows, capital events, and macro-driven sector rotations.
A beta of 0.70 indicates LOCO has historically moved less than the broader market, dampening realized volatility and producing tighter expected-move bands per unit of dollar exposure.
What is a collar on LOCO?
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 LOCO snapshot
As of May 14, 2026, spot at $13.39, ATM IV 38.50%, IV rank 10.45%, expected move 11.04%. The collar on LOCO 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 35-day expiry.
Why this collar structure on LOCO specifically: IV regime affects collar pricing on both sides; compressed LOCO IV at 38.50% typically pushes the short call premium to roughly offset the long put cost, with a market-implied 1-standard-deviation move of approximately 11.04% (roughly $1.48 on the underlying). The 35-day window matched to the front-month expiry keeps theta exposure bounded while still capturing the post-snapshot move; longer-dated LOCO expiries trade a higher absolute premium for lower per-day decay. Position sizing on LOCO should anchor to the underlying notional of $13.39 per share and to the trader's directional view on LOCO stock.
LOCO collar setup
The LOCO 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 LOCO near $13.39, the first option leg uses a $14.06 strike; additional legs (when the strategy has them) anchor to spot-relative offsets. Premiums come from the bid/ask midpoint on the listed LOCO chain at a 35-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 LOCO shares for the stock leg in covered calls and collars).
| Action | Type | Strike / Basis | Premium (est) |
|---|---|---|---|
| Buy 100 shares | Stock | $13.39 | long |
| Sell 1 | Call | $14.06 | N/A |
| Buy 1 | Put | $12.72 | N/A |
LOCO 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.
LOCO collar payoff curve
Modeled P&L at expiration across a range of underlying prices for the collar on LOCO. 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 LOCO
Collars on LOCO hedge an existing long LOCO 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.
LOCO thesis for this collar
The market-implied 1-standard-deviation range for LOCO extends from approximately $11.91 on the downside to $14.87 on the upside. A LOCO collar hedges an existing long LOCO 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 LOCO IV rank near 10.45% 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 LOCO at 38.50%. As a Consumer Cyclical name, LOCO options can move on sector-level news flow (peer earnings, regulatory updates, industry-specific macro data) in addition to LOCO-specific events.
LOCO 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. LOCO positions also carry Consumer Cyclical sector concentration risk; news flow inside the sector (peer earnings, regulatory shifts, supply-chain headlines) can move LOCO alongside the broader basket even when LOCO-specific fundamentals are unchanged. Always rebuild the position from current LOCO chain quotes before placing a trade.
Frequently asked questions
- What is a collar on LOCO?
- A collar on LOCO is the collar strategy applied to LOCO (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 LOCO stock trading near $13.39, the strikes shown on this page are snapped to the nearest listed LOCO chain strike and the premiums come straight from the end-of-day bid/ask midpoint.
- How are LOCO 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 LOCO collar priced from the end-of-day chain at a 30-day expiry (ATM IV 38.50%), 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 LOCO collar?
- The breakeven for the LOCO 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 LOCO market-implied 1-standard-deviation expected move is approximately 11.04%; if the move sits well outside the breakeven distance, the structure's risk-reward becomes correspondingly tighter.
- When should you consider a collar on LOCO?
- Collars on LOCO hedge an existing long LOCO 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 LOCO implied volatility affect this collar?
- LOCO ATM IV is at 38.50% with IV rank near 10.45%, 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.