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Sharing ❤️How I used sell put options to buy Tesla $22 cheaper 💵💰🏦💦💃👩‍🏫

Introduction:

In the popular TV show "2 Broke Girls," Max, a character known for her frugality, humor, and sexiness, often finds clever ways to save money. In this article, we'll explore Max's financial tactics and explain the concept of a cash-secured put. Additionally, we'll discuss a strategy for buying Tesla stock at a discounted price and how to potentially profit from it. So, let's dive in!

Part 1: The Cash-Secured Put

A cash-secured put is an options strategy where an investor sells a put option contract while simultaneously setting aside enough cash to buy the underlying stock if the option is exercised. Let's break down the strategy using Tesla as an example.

1.1 Strike Price and Expiration Date:

You decide to sell a cash-secured put on Tesla with a strike price of $250 and an expiration date of July 28, 2023.

1.2 Premium Collection:

You receive a premium of $11.95 for selling one put option contract. Since each contract represents 100 shares, the total premium collected is $1,195 ($11.95 x 100).

1.3 Obligation and Required Funds:

By selling the put option contract, you are obligated to buy 100 shares of Tesla if the option is exercised. To be prepared, you should set aside the necessary funds. In this case, with a strike price of $250, you would need $25,000 ($250 x 100) to fulfill your obligation.

Part 2: Buying Tesla Cheaper

Now that we understand the cash-secured put strategy, let's explore how you can potentially buy Tesla at a discounted price.

2.1 Patience is Key:

As Max would say, "Always be patient!" Waiting for the right opportunity is crucial. In this case, you're hoping that Tesla's stock price drops below $250 before the expiration date.

2.2 Selling a Call Option:

Once you acquire Tesla shares through the cash-secured put strategy, you can sell a call option to potentially generate additional income. By selling a call, you agree to sell your Tesla shares at a predetermined price (the strike price) if the stock reaches or exceeds that level before the call's expiration date.

2.3 Pricing Example:

Suppose Tesla's stock price is $265 when you acquire it through the cash-secured put. You decide to sell a covered call with a strike price of $275 and an expiration date of your choice. Let's assume you collect a premium of $5.00 for selling the call option.

2.4 Profit Calculation:

If Tesla's stock price remains below $275 by the call option's expiration date, the call expires worthless, and you keep the premium as profit. Additionally, you still own the Tesla shares you purchased through the cash-secured put.

2.5 Maximum Profit and Potential Loss:

To calculate the maximum profit if the put option is not exercised, we subtract the premium collected from the required funds. In this case, the maximum profit would be $23,900 ($25,000 - $1,100).

However, it's important to note that if Tesla were to go bankrupt, there could be a potential loss. In such a scenario, the value of your Tesla shares would decrease, and you might not be able to recover the full amount invested.

Conclusion:

Max's frugal and humorous personality in "2 Broke Girls" can teach us some valuable lessons when it comes to financial strategies. By implementing the cash-secured put strategy, you have the potential to buy Tesla shares at a discounted price if the stock drops below the strike price. Once you acquire the shares, you can sell covered calls to generate additional income. Remember, patience and careful consideration of market conditions are essential to succeed in these strategies.

In terms of the maximum profit, assuming the put option is not exercised, it would be the premium collected ($1,195) subtracted from the required funds ($25,000). Thus, the maximum profit would be $23,805 ($25,000 - $1,195).

However, it's important to be aware of the potential risks involved. If Tesla were to go bankrupt, there is a possibility of incurring losses. In such a situation, the value of your Tesla shares may significantly decrease, and you might not be able to recover the full amount invested.$S&P 500(.SPX)$ 

It's crucial to note that options trading involves risks, and the examples provided in this article are for illustrative purposes only. Before engaging in any investment strategy, it's advisable to do thorough research, consult a financial advisor, and carefully assess your risk tolerance.

Remember, Max's creative approaches to saving money in "2 Broke Girls" may inspire us, but it's essential to make informed decisions when it comes to financial investments

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