Trade Alert - (TSLA) May 1, 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) May 2023 $220-$230 in-the-money vertical bear put debit spread at $9.95 or best
Closing Trade – NOT FOR NEW SUBSCRIBERS
5-1-2023
expiration date: May 19, 2023
Portfolio weighting: 20% weighting
Number of Contracts = 25 contracts
This spread closed at $10 on Friday and we are down another $3 today so I think it's safe to call this one “WIN.”
We caught the home run with this trade.
Tesla shares fell $35, the Volatility Index ($VIX) dropped from $20 to $15.78, the Mad Hedge Market Timing Index retreated from 66 to 54, and the implied volatility for Tesla options melted from 61% to 44.5%. They all combined to take the value of this spread to $10.00 almost instantly.
As much as I love Tesla for the long term, the stock was wildly overbought for the short term. With their sixth price cut this year, another $3,000 for the Model 3, the company aims to buy market share at the expense of current profits. There is no doubt that the short-term hit to profits will be momentous.
This spread closed at $10 on Friday and I’ll give you five cents to get out of it.
Therefore, I am selling the Tesla (TSLA) May 2023 $220-$230 in-the-money vertical bear put debit spread at $9.95 or best.
As a result, you get to take home $2,875, or 13.07% in 6 trading days. Well done, and on to the next trade.
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 5 cents with a second order.
Elon Musk really checkmated the rest of the EV industry with his price cuts, which are 40% after adding in newly qualifying government subsidies.
With this trade, I was willing to bet that Tesla shares would not rise above $220 by the May 21 option expiration in 20 trading days.
Here are the specific trades you need to close out this position:
Sell 25 May 2023 (TSLA) $230 puts at………….....……….…$67.00
Buy to cover short 25 May 2023 (TSLA) $220 puts at…….$57.05
Net Proceeds:……………….......………….……………..……………$9.95
Profit: $9.95 - $8.80 = $1.15
(25 X 100 X $1.15) = $2,875, or 13.07% in 6 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.
