In a rally that some worry could be running on fumes, one quieter vehicle with room to drive profits into investors’ accounts is Electrameccanica Vehicles Corp (NASDAQ:SOLO). That said, there is one options strategy that can help investors avoid becoming a crash test dummy in SOLO stock. Let me explain by having us take a look at what’s happening off and on the price chart.
But we’ll get to that later on.
Meanwhile, Wall Street’s seemingly insatiable appetite for risk assets began the week with investors hitting the gas pedal Monday. The market’s bid was once again led by the tech-heavy, large-cap NASDAQ Composite’s gain of just over 2.5%. Spearheaded by Amazon’s (NASDAQ:AMZN) near-8%, broker-inspired jump, investors also cheered positive Covid-19 drug developments from AstraZeneca (NYSE:AZN), Pfizer (NYSE:PFE) and BioNTech (NASDAQ:BNTX), as well as the increased possibility of more stimulus money.
Solo Stock Sticks Out Among EVs
On the electric vehicle (EV) front, market leader and electric vehicle powerhouse Tesla (NASDAQ:TSLA) almost unsurprisingly bolted higher by nearly 9.5%. And China’s recently re-charged luxury EV outfit Nio (NYSE:NIO) soared by 15.6%.
However, hot stocks within this niche group weren’t entirely without incident. Shares of increasingly well-traded battery-powered truck and van upstart Workhorse (NASDAQ:WKHS) finished up 9.31%. However, the gain only came after shares managed to reverse similar size losses out-the-gate.
Additionally, the EV group’s reigning top battleground stock — Nikola (NASDAQ:NKLA) — wholly failed to find investors willing to back up truck. Shares sank more than 21% on the session. And SOLO stock just barely, relatively speaking, eked out a gain of just 2.38%.
Whoa!! Please apply the brakes and stop right there! SOLO stock?!
Electrameccanica Vehicle or SOLO is the latest publicly-traded company to find a bid during 2020’s gold rush of sorts into EV stocks. The company is a Canadian-based development-stage manufacturer which sells electric vehicles under its SOLO name.
The single seat SOLO is the real and quite impressive-looking deal, but readers can judge for themselves. Regardless, it’s ready for a test drive by appointment and set to be delivered to anxiously awaiting customers later this year. Electrameccanica’s, for lack of a better word, bad-ass Tofino and eRoadster models are in the development and pre-order stage.
And right now, for less than $3.50 and sporting a market capitalization of around $210 million and classic pullback pattern, SOLO looks like it has fuel in the tank to rally.
SOLO Stock Daily Price Chart
Technically, shares of SOLO have retraced or pulled back 36% from the stock’s recent relative high of $6. It’s an attractive spot for a buy decision after breaking multiple downtrend lines over the last twelve to eighteen months and as shares move into an emerging uptrend pattern. That’s the good news.
However, now for those warnings.
Small-caps like SOLO are inherently riskier investments. As well, competing in the auto industry against Goliath’s such as Toyota (NYSE:TM), Honda (NYSE:HMC), General Motors (NYSE:GM), Ford (NYSE:F) and of course EV linchpin Tesla, poses even greater challenges. Accordingly, and even while it appears SOLO is making all the right moves for today’s investors both off and the price chart, shares should be treated with extra caution.
Fortunately, though, and with caveats in place, for investors interested in SOLO stock as a more calculated investment, shares sport a fairly liquid options market to hedge risk.
After reviewing the board, one favored play is the December $7.50 call/$2 put collar combination. With shares at about $3.30, the defined, reduced risk and very flexible spread trades for the exact same price. And while it would unfair to the other side of the trade to call it a steal, the strategy is worth every single penny, with the benefit of not spending a single cent more to position more deliberately.
The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits. Investment accounts under Christopher Tyler’s management does not own any securities mentioned in this article.