How to Win with Options Ahead of Tesla's Q2 Delivery Data?
$Tesla(TSLA.US$ is set to announce its Q2 delivery numbers! According to FactSet data, the market expects Tesla's Q2 sales to decline by 6.5% year-on-year to 436,000 units.
The projected decline in performance is quite significant, suggesting there might be some slight volatility today or tomorrow. Tesla has been on a rise recently, so if the stock price drops, could this be an entry opportunity? If you're already in, how should you handle the volatility tomorrow? How should you position Tesla for the week?
Let's discuss strategies for getting in safely and trading Tesla this week.
Conclusion:
For options traders, you can enter at any time; it's just about choosing the right strategy, ensuring safety, and achieving expected profits.
Regarding this week's price movement, I personally believe the market maker might maintain a sideways move to kill options rather than pulling it up too high or letting it fall significantly. Why? Technical analysis shows Tesla is exhibiting a box pattern with relatively inactive trading volume compared to the past, indicating the market maker might choose to maintain a sideways move due to a lack of buyers. I estimate the price will hover around 200.
The projected decline in performance is quite significant, suggesting there might be some slight volatility today or tomorrow. Tesla has been on a rise recently, so if the stock price drops, could this be an entry opportunity? If you're already in, how should you handle the volatility tomorrow? How should you position Tesla for the week?
Let's discuss strategies for getting in safely and trading Tesla this week.
Conclusion:
For options traders, you can enter at any time; it's just about choosing the right strategy, ensuring safety, and achieving expected profits.
Regarding this week's price movement, I personally believe the market maker might maintain a sideways move to kill options rather than pulling it up too high or letting it fall significantly. Why? Technical analysis shows Tesla is exhibiting a box pattern with relatively inactive trading volume compared to the past, indicating the market maker might choose to maintain a sideways move due to a lack of buyers. I estimate the price will hover around 200.
Many mooers see Tesla above 210, but I think 210 is unlikely. The reasoning is simple: the fundamentals don't support 210, and 200 is about the limit. Additionally, hot money is currently with $NVIDIA(NVDA.US$ , and Tesla doesn't have any news to create a bubble. Therefore, in the short term, Tesla's price is likely to remain around 200.
With the price staying around 200, which is a slight increase from the current price and a small decline, I'll employ a bullish put spread strategy.
What is a Bullish Put Spread Strategy?
A bullish put spread is constructed by buying a lower strike price put and selling a higher strike price put. Its main feature is that it can be profitable even if the underlying stock price doesn't move, providing some risk protection. Unlike simply buying a call, the maximum profit and maximum loss are both limited in a bullish spread strategy.
How to Construct This Strategy:
Buy a lower strike price put.
Sell the same number of higher strike price puts for the same month.
Example:
If Tesla's current stock price is 197, we could:
Sell one put with a higher strike price of 200.
Buy one put with a lower strike price of 195 to reduce the naked selling risk.
With the price staying around 200, which is a slight increase from the current price and a small decline, I'll employ a bullish put spread strategy.
What is a Bullish Put Spread Strategy?
A bullish put spread is constructed by buying a lower strike price put and selling a higher strike price put. Its main feature is that it can be profitable even if the underlying stock price doesn't move, providing some risk protection. Unlike simply buying a call, the maximum profit and maximum loss are both limited in a bullish spread strategy.
How to Construct This Strategy:
Buy a lower strike price put.
Sell the same number of higher strike price puts for the same month.
Example:
If Tesla's current stock price is 197, we could:
Sell one put with a higher strike price of 200.
Buy one put with a lower strike price of 195 to reduce the naked selling risk.
The advantage of this strategy is using the proceeds from selling the put to buy the put, without using account capital and potentially having some extra money (19.100 - 16.250 = 2.85).
If Tesla's price is above the higher strike price, the maximum profit for the trader is the premium, i.e., 19.100 - 16.250 = 2.85.
If the price is below the lower strike price, the maximum loss is the difference between the strikes minus the premium, i.e., (200 - 195) - 2.85 = 2.15.
With both gains and risks present (invest wisely!!), if Tesla's price moderately increases, you can choose to close the position early for a profit.
Additional Tips:
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If you think the stock's movement will be unfavorable, you can close the options position before expiration to lock in gains or cut losses.
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Investors may sometimes choose to exercise options early, but this sacrifices the time value of the options, so consider this carefully.
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Risk Warning: The data mentioned above are just examples and hypothetical, not reflecting the real market situation.
If Tesla's price is above the higher strike price, the maximum profit for the trader is the premium, i.e., 19.100 - 16.250 = 2.85.
If the price is below the lower strike price, the maximum loss is the difference between the strikes minus the premium, i.e., (200 - 195) - 2.85 = 2.15.
With both gains and risks present (invest wisely!!), if Tesla's price moderately increases, you can choose to close the position early for a profit.
Additional Tips:
That concludes today's sharing. These are my personal thoughts and do not constitute any investment advice. Feel free to share your different opinions in the comments for discussion.
Disclaimer: Community is offered by Moomoo Technologies Inc. and is for educational purposes only.
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EnjoyTheProcess : I have always like ur posts on options strategy. There is a third scenario u forgot. Price close between 195 and 200. Long put OTM, short put ITM. U get assigned to buy the stock at USD200. The following Monday, price might continue to drop. This is the bang balls scenario u have to consider before u use this strategy.