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For illustration, if an investor holds 1,000 shares of Tesla at a price of $393, they could sell 12 contracts of a $390 strike price put, receiving approximately $12,000 in premium. By purchasing long puts at a lower strike price, the investor secures a buffer against significant losses.
The anticipated scenarios illustrate potential outcomes based on various price points for Tesla by the week’s end. Even with a drop to $370, the advanced strategy limits the financial impact to a mere 3.3% loss in terms of alpha, while allowing the investor to maintain flexibility and control over their portfolio.