Tesla's Stock Surge: What Should We Do Next?
Last week, $TSLA.US$ ’s stock soared 27%, marking the longest streak in over a year! ![]()
![]()
But now, after this impressive rally, should we expect further gains, continuing the June 2023 13-day streak, or will it face a “buy the rumor, sell the news” scenario? Want to sell high but afraid of missing out? Want to hold on for more but worried about losing it all? In this article, let’s discuss how to smartly use options to lock in profits when Tesla's stock is on a tear.
Contents:
Should You Keep Holding Tesla?
What is a Protective Put?
How to Execute?
Disclaimer: The following is a personal thought process, shared for informational purposes and record-keeping. It does not constitute investment advice. Please treat market information cautiously.
1. Should You Keep Holding Tesla?
News Highlights:
Market enthusiasm for FSD (Full Self-Driving)
Tesla’s collaboration with $SMCI.US$ and $DELL.US$ to build a super data center
Tesla Model Y added to Jiangsu Provincial Government’s new energy vehicle procurement list
Tesla’s second-generation humanoid robot Optimus debuted in Shanghai
But now, after this impressive rally, should we expect further gains, continuing the June 2023 13-day streak, or will it face a “buy the rumor, sell the news” scenario? Want to sell high but afraid of missing out? Want to hold on for more but worried about losing it all? In this article, let’s discuss how to smartly use options to lock in profits when Tesla's stock is on a tear.
Contents:
Should You Keep Holding Tesla?
What is a Protective Put?
How to Execute?
Disclaimer: The following is a personal thought process, shared for informational purposes and record-keeping. It does not constitute investment advice. Please treat market information cautiously.
1. Should You Keep Holding Tesla?
News Highlights:
Market enthusiasm for FSD (Full Self-Driving)
Tesla’s collaboration with $SMCI.US$ and $DELL.US$ to build a super data center
Tesla Model Y added to Jiangsu Provincial Government’s new energy vehicle procurement list
Tesla’s second-generation humanoid robot Optimus debuted in Shanghai
Analyst Insights:
Dan Ives of Wedbush believes Tesla is the most undervalued AI company, with its AI business potentially adding $1 trillion in value.
A successful robotaxi event on August 8 could drive the stock price even higher.
However, as of late June, data from Hazeltree shows that about 18% of over 500 tracked hedge funds held short positions on Tesla, the highest in over a year.
Despite the bearish sentiment from some, I believe these shorts are just "paper tigers." The booming electric vehicle market and Tesla’s advancements in autonomous driving make it likely that any dips would be minor adjustments. But to hedge against potential downturns, I would consider a Protective Put.
2. What is a Protective Put?
A Protective Put involves holding the underlying asset (Long Stock) while buying put options (Long Put) to hedge against a drop in stock price. This strategy offers unlimited upside with limited downside risk.
3. How to Execute?
While holding Tesla stock, you can buy a corresponding number of puts. If you’re worried about a potential drop in Tesla’s stock, you might spend a bit more on "insurance" by choosing a put with a strike price close to the current price. If you’re confident about the future but still want some protection without spending too much, you might choose a put with a lower strike price.
Example:
Assume Tesla’s closing price on July 9 is $253. If you believe Tesla will continue to rise and any dips will be minor, you might not want to spend too much on the put premium. In this case, you could choose a put with a strike price below the current price, like a $240 strike price expiring on August 16, with a premium of $14.11.
If the stock continues to rise, you won't exercise the put, and your total profit will be reduced by the cost of the put premium, but you’ve bought peace of mind.
If the stock falls below the breakeven point ($253 + $14.11 = $267.11), the put gains value. You can exercise the put, selling your shares at the strike price, thus offsetting losses from the stock’s decline. The maximum loss would be the stock price minus the strike price plus the put premium ($253 - $240 + $18.75 = $31.75).
What are your thoughts on Tesla’s future? Feel free to share in the comments!
Risk Warning: The data mentioned above is for illustration only and not based on actual market conditions.
2. What is a Protective Put?
A Protective Put involves holding the underlying asset (Long Stock) while buying put options (Long Put) to hedge against a drop in stock price. This strategy offers unlimited upside with limited downside risk.
3. How to Execute?
While holding Tesla stock, you can buy a corresponding number of puts. If you’re worried about a potential drop in Tesla’s stock, you might spend a bit more on "insurance" by choosing a put with a strike price close to the current price. If you’re confident about the future but still want some protection without spending too much, you might choose a put with a lower strike price.
Example:
Assume Tesla’s closing price on July 9 is $253. If you believe Tesla will continue to rise and any dips will be minor, you might not want to spend too much on the put premium. In this case, you could choose a put with a strike price below the current price, like a $240 strike price expiring on August 16, with a premium of $14.11.
If the stock continues to rise, you won't exercise the put, and your total profit will be reduced by the cost of the put premium, but you’ve bought peace of mind.
If the stock falls below the breakeven point ($253 + $14.11 = $267.11), the put gains value. You can exercise the put, selling your shares at the strike price, thus offsetting losses from the stock’s decline. The maximum loss would be the stock price minus the strike price plus the put premium ($253 - $240 + $18.75 = $31.75).
What are your thoughts on Tesla’s future? Feel free to share in the comments!
Risk Warning: The data mentioned above is for illustration only and not based on actual market conditions.
Disclaimer: Community is offered by Moomoo Technologies Inc. and is for educational purposes only.
Read more
Comment
Sign in to post a comment
118062799 : tesla is still loss-making stock considering the opportunity costs if u held the stagnant stock over 6mths. 1 big jump in 6mths dont mean much
Maniac Fool 118062799 : Ya. Many did buy it too high and still bleeding
151323992 : I'll tell you what to do, sell and come to nvda where the party is about to begin
Goodjobguys 118062799 : Do you own Tesla stock? Just curious?
Paul Anthony : tq My lovely friend thanks again proud of you so much for your help with this learn about the best person in charge A1 tq keep the best with your family take care and help someone homeless people and your all hard work for me very helpful thanks Gbu All you Amen together
proud of you