Tesla Motors Inc. (NASDAQ: TSLA) is one of the hotter post-IPO issues of 2010. The U.S.-based electric car manufacturer gave its first earnings report last night since coming public, and the headline was a shocker: -$5.04 EPS.
Seeing a loss of $5 per share is something that may put the fear into the green-minded investors. Yes, it is a one-time loss, but it seems it will bring at least some pause.
TSLA went from being a hot IPO at pricing to a busted IPO during the June sell-off. It has no real support from analysts yet, and little in the way of price targets and earnings estimates. However, TSLA has cult stock status, and it already has stock options that trade somewhat actively.
Tesla shares are currently down more than 3% and are trading at $20.52. The stock has been stuck in a $20 to $22 trading range for the last three weeks, trying to find direction. And I believe there is a speculative options trade here.
Whether the GM Volt will be any real competition for Tesla remains to be seen. Tesla is a high-priced car, while the Volt is less pricey, and that eight-year warranty from “Government Motors” will offer some comfort for the electric plug-in car buyer.
GreenBeat from VentureBeat cautioned: “The Tesla saga will undoubtedly produce many twists and turns in future. But it’s hard to find a single auto analyst who believes Tesla has any hope of growing as an independent automaker; the capital needs, economies of scale, and low margins of the global industry pose hurdles the company is too small and too under-capitalized to overcome.”
This is just their opinion, of course. Still, this seems logical enough when share prices are elevated. If the stock gets cheaper, that’s a different story.
For the options trader, going out too far on the calendar is a sucker’s bet. The stock’s volatility and hot status makes the option premiums too high. The August expiration is close (Aug. 20), but going beyond September is just too costly. For example, the TSLA Aug 20 Puts cost $1.20 and the TSLA Aug 17 Puts cost 30 cents. The same strikes for September puts cost $2.25 and 90 cents, respectively.
Picking this one the heels of earnings and going into a time when analysts may cover this one will seem a bit like a dart throwing match. I am the first to admit that there is more guesswork here than there is solid data. But this is a speculative trade, and after eyeballing the numbers, the sweet spot appears to be is the TSLA Aug 18 Puts at $45 cents.
You don’t want to hold these for more than a week, as the price compression will begin rapidly by the end of next week. If the stock rallies on analyst calls, you should just take your lumps. If the stock price sinks another 5% or 6%, those puts could go to 75 cents or so without even hitting the $18 strike. But keep in mind that this is a very speculative trade.
Follow Jon Ogg on Twitter @jonogg.
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