Trade Alert - (TSLA) February 28, 2023 - TAKE PROFITS - SELL

When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but, on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline.

 

Trade Alert - (TSLA) – TAKE PROFITS

SELL the Tesla (TSLA) March 2023 $145-$155 in-the-money vertical bull call debit spread at $9.90 or best

Closing Trade

2-28-2023

expiration date: March 17, 2023

Portfolio weighting: double 20%

Number of Contracts = 25 contracts

With 90.9% of the maximum potential profit in hand, we have pretty much squeezed all the juice out of this lemon. The risk/reward of continuing is no longer favorable.

As my late mentor Barton Biggs used to tell me, always leave the last ten cents of a move to the next guy. In any case, Tesla’s Investor Day is tomorrow, potentially setting up a “buy the rumor” sell the news type move.

Therefore, I am selling the Tesla (TSLA) March 2023 $145-$155 in-the-money vertical bull call spread at $9.90 or best.

As a result, you get to take home $2,500, or 11.24% in only 7 trading days. Well done and on to the next trade.

If you can’t get this done at a price you’re happy with, then just run the position into expiration.

DO NOT USE MARKET ORDERS UNDER ANY CIRCUMSTANCES.

Simply enter your limit order, wait five minutes, and if you don’t get done, cancel your order and lower your offer by five cents with a second order.

After markets have big moves like we saw in January, you tend to get no moves for a couple of months. Too much performance and market action was pulled forward in January.

With the highest implied volatility in the market at 78%, a short Tesla strangle is far and away the best way to play this. This is the first leg in that strangle. The long side also gets extra support from the 50-day moving average at $155.13.

We also have the autonomous driving recall of 360,000 Tesla vehicles here to trade against. A Volatility Index ($VIX) back up to $24, incited by today’s 500-point plunge in the Dow is further icing on the cake.

The selloff was prompted by rising fears of a debt default by the House of Representatives this summer which have taken interest rates dramatically higher. As a result, Tesla has had to raise interest rates on company-financed new sales from 2.0% to 5.0%.

Ford Motor’s (F) halt of its assembly line for the F-150 Lightening because of battery design problems is a further support for Tesla on the long side.

Tesla is now the most widely owned stock in the world and accounts for a staggering 6% of the options market.

Call spreads this far in the money trade all over the map but give this your best shot.

An onslaught of new Tesla positives will hit the market in 2023. The new Cybertruck comes out and there is a two-year waiting list out the gate and deposits in hand for 1.5 million vehicles.

The company is generating such enormous cash flows that it is like to carry out $10 billion in share buybacks, especially with the Price this low. There are no real competitors on the horizon, except for a handful with minimal production at big losses outside of China.

All the new negatives are now in the price, the China lockdowns, the product recalls, the Shanghai shutdown, recession fears, and even Elon Musk himself going from a premium to a discount are now in the price. At the end of the day, Tesla really is a consumer discretionary stock.

Twitter will remain a distraction, but only so much of a distraction. A now $10 billion company can only drag down a former $365 billion company so much. Elon Musk has been chastised severely. Soon he will appoint a new Twitter CEO who knows the social media industry cold and the distraction will go away.

Tesla will remain the top EV maker for the next decade easily.

This is a bet that the Tesla (TSLA) will not trade below $155 by the March 17 option expiration day in 19 trading days.

Here are the specific trades you need to exit this position:

Sell 25 March 2023 (TSLA) $145 calls at………………....…..…$65.00

Buy to cover short 25 March 2023 (TSLA) $155 calls at…….$55.10

Net Proceeds:………………………….…….............….…………….…$9.90

Profit: $9.90 - $8.90 = $1.00

(25 X 100 X $1.00) = $2,500, or 11.24% in 7 trading days.

 

 

 

 

 

 

If you are uncertain about how to execute an options spread, please watch my training video by clicking here.

The best execution can be had by placing your bid for the entire spread in the middle market and waiting for the market to come to you. The difference between the bid and the offer on these deep-in-the-money spread trades can be enormous.

Don’t execute the legs individually or you will end up losing much of your profit. Spread pricing can be very volatile on expiration months farther out.

Keep in mind that these are ballpark prices at best. After the alerts go out, prices can be all over the map.