I recently shared winning trades in Tesla Inc (NASDAQ:TSLA). The most recent was a long TLSA upside trade, and earlier I suggested investors catch it as a falling knife. They both brought me fast profits, so I now need to reset another.
The financial fundamental story in TSLA almost doesn’t matter. So-called financial bad news has been a temporary source of downside pressure. Take the recent capital raise for example; its anticipation brought about worry which was reflected in price action, then once the event passed, Tesla stock rallied.
The overall fundamental picture for TSLA stock is one that is bifurcated — there are haters versus life-long devotees. I fall in the middle as I am not a fan of its prospects but I strongly believe in TSLA buyers. All I need to know is that they will step in to support the stock after falls.
TSLA is a dominant player in batteries, especially for the auto industry. To complement that, they also have a tie into the solar space.
Although combustion engines are still the norm, e-cars have been gaining ground.
For the next few months, TSLA stock is a bad short idea. Bears cannot disprove the upside story in Tesla’s claims. They are concepts with long-term milestones. This usually creates a negative headline vacuum, levitating the stock. Elon Musk also publicly recommitted to staying there for the long term, so that risk is low too.
Click to Enlarge Not all TSLA stock fans will buy it at the same level; hence the chop in its price action. I have been successful in selling risk behind lines where most Tesla bulls would buy. Today I look to repeat performance, but for the long term. My schedule will be hectic for the next few months, so I want positions that are relatively low maintenance.
TSLA Stock Trade
The Bet: Sell the TSLA Jan 2018 $145 put for $4 per contract or better. This is a bullishly biased trade. I need Tesla stock to stay above my sold put — otherwise I am committed to buying shares at $145 even if it falls much lower.
For a less aggressive stance, I can modify the bet into a credit put spread instead.
The Alternate: Sell the TSLA Jan 2018 $150/$145 credit put spread. This is also a bullish trade for which I collect 60 cents per contract. I have a 90% chance that TSLA stays above my sold risk to yield 11% on risk. I am not required to hold any of my options position through their expiration dates.
Nicolas Chahine is the managing director of SellSpreads.com. Learn options as easy as 1-2-3 here. As of this writing, he did not hold a position in any of the aforementioned securities. You can follow him on Twitter at @racernic and stocktwits at @racernic.