An investor has a portfolio consisting of 1000 units of Stock X, purchased at a price of $25. His maximum investment horizon is 1 year and he intends to exit the position if his price target of $55 is achieved. If his price target of $55 is not achieved in a year time, he will still exit the position regardless the price.

6 months have elapsed and the price of X has appreciated to $35. However, in the next 6 months, it is expected market volatility would increase due to potential US-China tensions.

Distinguish a combination of options, based on his trading strategy, that the investor can set up to protect his existing profits in the coming 6 months.

Explain your answers clearly.

Given that the volatility of X is 48% and the risk-free rate is 0.5%. Evaluate the amount of money, to the nearest dollars, that is required to set up the position suggested.