[00:01] earnings will stop its recent slide, but just in case it doesn't, here's how you can get some insurance. Stock holders can buy protection against a potential drop by buying what's called a put option. A put gives its owner the right
[00:13] to sell a stock at a fixed price before a certain date. If you wanted to buy protection against a bad earnings report by Tesla, one way is to buy one put at a $375 strike level for July 24th expiration against 100 shares that you
[00:28] already own. The strike is a price at which the shares can be sold. July 24th is the expiration date, the last day you have the right to sell those shares at that price. With Tesla stock trading near $380,
[00:40] the put allows you to sell those shares at $375 >> even if there's a big drop after earnings. Without the hedge, every $1 [music] costs about $100 because the investor
[00:52] owns 100 shares. As this Alpha Space chart shows, the put contract gains value as Tesla falls. That gain helps offset losses on the shares. If Tesla plunges, the put can offset a lot of damage, but options don't come without
[01:06] >> [music] >> the premium may cost more than the loss it prevents. If Tesla rises or stays near current levels, >> much of the value could disappear by expiration.