A lower risk way to bet on a Tesla rally as Musk’s comments add to share-price volatility
After what seems like a lifetime but has only been four years of delays, the Cybertruck has finally zoomed into the automotive world and has taken many by surprise. Tesla CEO Elon Musk hosted a delivery event this week at the company’s factory in Austin, Texas, touting its towing abilities, race-car like acceleration, and even bulletproof doors. Production was supposed to kick off in late 2021, but was adversely impacted due to Covid’s supply chain shortages and manufacturing hiccups. Tesla stated that initial production will be small as they ramp up the Cybertruck line. This jaw dropping event is in the wake of Elon Musk’s comments earlier this week at the 2023 DealBook Summit in New York. Sir Elon succinctly let advertisers know how he feels about any and all threats towards his X platform. As I have traded in and out of Tesla for years, I do believe Elon’s emotional roller coaster (either derived from Tesla or one of his other companies) has provided opportunities for investors. The current opportunity I see for TSLA is a move higher into 2024 once this volatility is digested, yet again. Tesla call spread To capture this move higher, I want to buy a call spread. This bullish view is predicated on the Tesla chart below that depicts the potential for the share price to elevate and revisit $300. The option strategy that I will utilize is buying a call spread better known as a bull call spread. This credit spread can be established by buying an out-of-the-money call and then reducing the cost of the call purchase by selling another call option further out of the money. The same expiration will be used for both call options. I want to look at the last three years of price action for Musk’s car company to select the strike prices for this call spread. TSLA mountain 2020-12-01 Tesla, 3 years The trade Buying one January 19 th (regular expiration) TSLA $260 call option for $6.70 Selling one January 19 th (regular expiration) TSLA $300 call option for $1.70 Net debit of $5.00 costing an investor $500 per spread. Risking $500 to make $4,000 (net $3,500 winner if Tesla settles above 300 on Jan 19. Love Musk or hate Musk, the volatility associated with his behavior can potentially be profitable. This trade is not bulletproof like the Cybertruck but, it should allow you to profit from a move back to a high volume area for the leading EV company up at $300. DISCLOSURES: (Long Tesla, short tesla puts, long call spread) THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
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