Part 3/6:
Warren provides a detailed analysis of various options available for Tesla stock, referencing specific strike prices ranging from $400 to $800, all with expiration on June 17, 2027. By analyzing the cost associated with purchasing these options, he illustrates how the strike price affects the potential profitability.
For example, if an investor purchases a long call option with a strike price of $400 at a cost of $12,100, they’re effectively buying the option to purchase 100 shares at that price. However, if the stock trades at a price below $400 on the expiration date, the option becomes worthless, meaning the initial investment would be lost. Conversely, should the stock rise significantly above the strike price, the investor stands to gain.