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Jaleel is holding some Tesla shares (NASDAQ: TSLA) and The TSLA stocks are currently trading...

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Finance

Jaleel is holding some Tesla shares (NASDAQ: TSLA) and The TSLA stocks are currently trading at $985 on the Nasdaq. Given TSLA stocks are very volatile, Jaleel wishes to protect the value of his investments. He seeks your advice on using option contracts and presents a list of options for you to choose from. Assume the number of underlying shares per contract is 100 shares.

strike call premium moneyness put premium moneyness
$975 $10.01 $0.01
$980 $4.45 $0.04
$985 $0.63 $0.99
$1005 $0.05 $20.48

Identify what kind of risk that Jaleel is facing and to hedge this risk, which option would you suggest that Jaleel should purchase? Why?

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