ORCL — Loss Absorption Case Study (Fair-Value Anchored Capital Extraction)

This case study focuses on the part that traditional CAGR ignores: drawdown absorption. ORCL dropped from $305.45 to $190.00 in just 45 days. A normal buy-and-hold investor experiences the full loss immediately. The Capital Extraction Engine reduces that damage by turning overvaluation into cash protection up front.

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Trade Setup (Day 0)

Shares: 200
Entry price (broker basis): $305.45 /share
Fair value anchor: $190.00 /share
Original contract: Strike K₁ = $190.00, Premium P₁ = $151.00 /share, Expiry Jan 21, 2028

Premium Collected (Cash)

$30,200.00
$151.00/sh

Economic Basis (After Extraction)

$154.45 /sh
$30,890.00 total

Downside Buffer vs Entry

49.44%
Premium ÷ Entry

Basis vs Fair Value

18.71%
1 − (AdjCost ÷ FV)

Interpretation: the engine “prepaid” protection by extracting $30,200.00 up front. Your true economic cost became $154.45/share, which is below your fair value anchor of $190.00.

Downturn Snapshot (45 days later)

ORCL traded down to $190.00. At that moment, the $190.00 call marked at $61.98. This is where the “loss protection” becomes measurable.

Measure	Per Share	Total (200 sh)
Buy & Hold Stock P/L ($190.00 − $305.45)	$-115.45	$-23,090.00
Option P/L ($151.00 − $61.98)	$89.02	$17,804.00
Engine Net P/L (Stock + Option)	$-26.43	$-5,286.00
Loss Avoided vs Buy & Hold	$-89.02	$-17,804.00
Drawdown Absorbed	-77.11%	(saved ÷ \|B&H loss\|)

Key insight: In this fast crash, the engine absorbed about -77.11% of the buy-and-hold drawdown at that moment. That “economic advantage” is typically invisible in simple CAGR reporting because it’s a path advantage (less damage during the crash), not just an end-of-period return.

Reset Opportunity: Upgrading the Exit Price

After ORCL traded at/under the original anchor zone, you improved the structure by paying about $1,000.00 (≈ $5.00/share) to lift the strike from $190.00 to $250.00.

Strike Lift (K₂ − K₁)	+$60.00 /sh
Potential Exit Improvement (on shares)	+$12,000.00
Roll Cost (Compromised Premium)	$1,000.00
Reset Efficiency (Exit uplift ÷ roll cost)	12.00×
Adjusted Cost After Roll (simplified)	$159.45 /sh
Still Below Fair Value?	Yes (16.08% below FV)

Framework takeaway: the engine doesn’t just reduce drawdowns — it often creates a reset window where you can improve the future exit price after the market reprices downward, while still keeping the position anchored around fair value.

Cash extracted (float) and redeployment runway

The extracted premium is not just “return.” It’s cash on hand that can be redeployed. This section shows the compounding illustration on the initial premium received: $30,200.00 over approximately 24 months until expiry (Jan 21, 2028).

Monthly Rate	Future Value @ 24 mo	Float Gain
1.00%	$38,345.99	$8,145.99
1.50%	$43,170.98	$12,970.98
2.00%	$48,574.80	$18,374.80
3.00%	$61,390.38	$31,190.38

Quick Recap

Shares	200
Entry Price	$305.45 /sh
Fair Value Anchor	$190.00 /sh
Premium Collected	$151.00 /sh ($30,200.00 total)
Adjusted Cost (after extraction)	$154.45 /sh
Downturn Snapshot	$190.00 in 45 days
Call Mark (K₁=$190.00)	$61.98 /sh
Loss Avoided vs B&H (snapshot)	$-17,804.00
Strike Reset	$190.00 → $250.00 (cost ~$1,000.00)
Expiry	Jan 21, 2028 (24 months)

Note: The loss-absorption math above uses the real market mark for the old call ($61.98) at the downturn snapshot. This is why the framework’s protection can be quantified even before expiration.

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Disclaimer: Educational illustration only; not investment advice. Options involve risk. Use the framework only on businesses with high survival confidence and a defensible fair value anchor.