Tesla Premium Earnings Trade Ideas -Unlocked

• Posted by Greg Harmon
• on November 5th, 2013

Originally published at 1:52pm for subscribers so prices have shifted a bit.

Tesla, $TSLA, had a monster run higher since reporting their first profit about 6 months ago. The pullback ended last week retraced only 23.6% of that move higher and if it continues higher will be another indication of a strong stock. A 38.2% retracement would be more normal. Yesterday it pressed up against the top of a bull flag and after breaking it Tuesday has no closed the gap lower and is retesting the break out level over the cross of the 20 and 50 day Simple Moving Averages (SMA). The Relative Strength Index (RSI) pulled back to the 40 level and bounced while the Moving Average Convergence Divergence (MACD) indicator pulled back, and is now close to crossing higher. The bias is neutral to higher in the very short run within the uptrend. There is resistance higher at 181.50 and 185.60 followed by 194.60. Support comes lower at 173 and 155 followed by 150 and 133-134. The reaction to the last 6 earnings reports has been a move of about 11.47% on average or $20 making for an expected range of 152.50 to 193. The at-the money weekly November Straddles suggest a similar $20 move by Expiry with Implied Volatility at 160% above the November at 98% and the December at 81%. Short interest is a high at 24%. There was a large buyer, 2500 times, of the November weekly 150 Put today at 2.00. Aside from that November weekly 175 Calls are active trading 6260 times versus Open Interest at 4070. This should be wild.

Trade Idea 1: Buy the December 170/175 Call Spread for $2.70.

Trade Idea 2: Sell the November/December 140 Put Calendar for a $2.60 credit.

Combining trades #1 and #2 gives a December 170/175 Call Spread, nearly fully valued at the time of this writing, and protection for 8 trading days to 140, for 10 cents. If it goes up you win. If it drops precipitously you sell the November 140 Put and look for a bounce to hold over 140 by December. If it drops but only to 150 you likely also win.

Trade Idea 3: Sell the November 8 weekly 170/175 Strangle for a $18.50 credit.

This gives protection for a range of 151.50 to 193.50 for Friday.

Trade Idea 4: Sell the November 8 weekly 160/185 Strangle and buy the December 160/185 Strangle for $10.80.

This trade looks for a muted response this week and a move either way over time.

Trade Idea 5: Buy the November 160/150 1×2 Put Spread for free.

This trade has a maximum profit at 150 of $10 and the gives back $1 for each $1 move lower under 150. If it closes at 150 or lower on November Expiry you will be put the stock but with a 140 basis.

Trade Idea 6: Buy the November 160/150/145 Broken Wing Put Butterfly for $1.90.

This is essentially long a 160/150 Put Spread and then short a November 150/145 Put Spread. It makes money anywhere below 148 on Expiry and maxes out at a price of 150 for a $8 gain.

These are representative of the types of ideas given to premium customers every day. We also do straight puts and calls. Enjoy! 🙂

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