To The Moon

$Tesla(TSLA)$ stock roared back 8.22% on Friday, helped by a big price-target boost from a Wall Street analyst. The stock dropped 6.1% last Thursday and closed at $379.28, leaving it down 21% from a record close of $479.86 in December.

Tesla reported fourth-quarter deliveries on Thursday, posting a respectable 495,570 vehicles sold. The number was a quarterly record but still fell short of Wall Street estimates by some 10,000 units.

Investors are focused more on 2025 right now. Tesla is expected to launch a lower-priced model, helping boost volume growth. The car, due out in early 2025, should start around $30,000 before any federal or state subsidies.

Then there is artificial intelligence. Tesla uses AI to train its autonomous driving software and plans to launch a self-driving robo-taxi service in late 2025. “The $1 trillion of AI valuation has started to get unlocked in the Tesla story and we believe the march to a $2 trillion valuation for Tesla over the next 12 to 18 months has now begun,” wrote Wedbush analyst Dan Ives in a Thursday report.

To protect your Tesla stock position amidst wild fluctuations, you can use several options strategies that hedge against downside risk while allowing for upside potential. Below are some strategies tailored for risk mitigation:

1. Protective Put (Direct Hedge)

• Setup: Buy a put option on Tesla stock at or below its current price.

• Objective: Protect against downside risk while retaining upside potential.

• Example: Hold 100 shares of Tesla at $410, buy a $400 put expiring in a month. $TSLA 20250131 400.0 PUT$

• Cost: The premium paid for the put.

• Risk: Limited to the stock's price minus the strike price plus the premium.

• Reward: Unlimited upside if Tesla rises.

• Ideal Scenario: Protects you in case of a significant price drop.

2. Collar (Cost-Effective Hedge)

• Setup: Combine a protective put with a covered call.

• Objective: Offset the cost of the put by selling a call, capping upside potential.

• Example: $TSLA Custom 250131 400.0P/430.0C$

  • If Tesla is trading at $410:

    • Buy a $400 put.

    • Sell a $430 call.

• Cost: The net premium (put cost minus call premium).

• Risk: Limited downside to $400 (minus net premium).

• Reward: Capped at $430.

• Ideal Scenario: Provides downside protection while allowing for modest upside.

3. Covered Call (Income Generation)

• Setup: Sell a call option against your Tesla stock position.

• Objective: Generate income to offset potential losses.

• Example: Hold 100 shares of Tesla at $410, sell a $430 call. $TSLA 20250131 430.0 CALL$

• Risk: Unlimited downside on the stock minus the call premium.

• Reward: Limited to the strike price ($220) plus premium received.

• Ideal Scenario: Tesla trades flat or rises slightly without exceeding $220.

4. Cash-Secured Put (Entry at Lower Price with Hedge Intent)

• Setup: Sell a put option at a lower strike price while holding stock.

• Objective: Earn premium and potentially buy more shares at a lower price.

• Example: Sell a $390 put while Tesla is trading at $410. $TSLA 20250131 390.0 PUT$

• Risk: If Tesla falls below $390, you're obligated to buy more shares at that price.

• Reward: Premium received plus any upside in the stock.

• Ideal Scenario: Tesla remains above $180, allowing you to keep the premium.

5. Zero-Cost Collar (Minimal Cost Hedge)

• Setup: Adjust the strike prices of the protective put and the covered call to create a near-zero cost hedge.

• Example: $TSLA Custom 250131 390.0P/430.0C$

  • Buy a $390 put.

  • Sell a $430 call.

  • Adjust the strikes so the call premium offsets the put cost.

• Cost: Minimal or no out-of-pocket expense.

• Risk: Limited downside to the put strike price.

• Reward: Upside capped at the call strike price.

• Ideal Scenario: Protects against downside without significant cost.