Trade Alert: Being Tactical About Tesla

We were bullish below $200. Now we're betting on a modest, short term pullback.

Tesla: Time For A Pause

Three months ago, when Tesla (TSLA 0.00%↑) was trading at $173 per share, we placed a bullish bet on the company (Trade Alert: EVs).

In that post, we wrote,

The first one is the most obvious one, Tesla (TSLA -0.61%↓). Its shares are down about a third year-to-date (YTD). First it missed its Q4 earnings, and then it posted an 8.5% year-over-year decline in 1st quarter deliveries, driven in part by shutdowns of its Giga Berlin factory. Tesla shares were trading at close to $250 at the end of 2023; our bet below is that they’ll be trading at over $205 next January, and if we’re right, we’ll make a ~200% gain.

Flash forward to July 10th, and Tesla shares were up 52% since then. We’re still bullish on the stock long term, and are still holding our bet that the stock will be above $205 in January, but Tesla’s looking a little overbought here, with an RSI (Relative Strength Index) approaching 88.

Our trade today is a bet that Tesla pulls back about 3% by the end of next week. If we’re right, we’ll make a profit of about 150% on the money we risk.

Thursday Afternoon Update

Our trade below filled before 10am today. Currently, it’s in the black with Tesla down about 6.5% on the day, thanks to news the company had delayed its robotaxi demo until October.

Details on our trade that filled this morning below.

Our trade is a vertical spread on Tesla expiring on 7/19/2024, buying the $257.50 strike calls and selling the $255 strike calls for a net credit of $1.50. The max gain on 2 contracts is $300, the max risk is $200, and the break even is with TSLA at $256.50. This trade filled at $1.50.

Exiting This Trade

No exit, like the Sartre play. We’ll just hope Tesla closes below $255 on 7/19, so these options expire worthless.