Appreciate your reply. I think your strategy works for partial protection. The breakeven is probably around $122.5 in your case. And there is a big risk of being called out the covered call at $130. I have been called out before, but saving it by purchasing it back after market at the strike price. Won't do it again. I'd also like to long the put at the current price for full protection purpose. So for NVDA I did a bear put spread (spread of $12) to limit the downside from current price while not losing to the upside if the stocks runs higher. I did short covered call far away from the current price, only to use it as a way of premium cost reduction. It ended up protecting $12 of downside while still keep it open for upside gain, with minimum total premium of $0.85 per contract.
However, as options have time value, their price don't fluctuate exactly the same as the underlying stocks, it is hard to fully protect the long position. But I didn't expect the coverage to be just 55%. Anyway, I guess that's the nature of options. The time value on them prevent them from fully reflecting the stock price movements. I think the closer to the expiration date, the closer the options will reflect the stock price movements when the price drops. If at the expiration date the price ends up dropping to the strike price of the short put, I will have a maximum gain of $12 minus the $0.85 cost per contract ($11.15), which only at that time hedge 100% the long stock.
I think the delta will go higher to perhaps 0.8 when the price drops to the strike price of the short put even if it is still far away from the expiration date, as it will be deep in the money, making the hedge 80% of the stock decline. $12x0.8=$9.6 downside protection. $9.6-$0.85=net gain of $8.75.
It is only limited downside risk protection of $11.15(net of premium) if at the expiration date or $8.75 (net of premium) if far ahead of expiration though. If the stock price drop below the short put strike, there is no more protection. But I do not want to pay the hefty premium for unlimited downside protection.
