Are you trading Tesla (TSLA) tomorrow? Here’s how you do it! (May 02, 2018)


We are looking at Tesla ( NASDAQ: TSLA ). The company reported earnings after the bell and you can see what happened with the stock. It initially ran up to above 310.00, sucked in all the true believers and then the stock is now back down to 300.00. As I do this it is settling out a little bit below 300.00 now.

As I was preparing for this and was looking at other things and doing my Strategy Session video I had in my notes that if Tesla ( NASDAQ: TSLA ) broke below 300.00 tomorrow morning this stock could really be in for a lot of downside action. Because this whole thing, this whole move here, is based on optimism that Elon Musk is actually Jeff Bezos with hair and that Tesla ( NASDAQ: TSLA ) is actually Amazon ( NASDAQ: AMZN ) with solar panels; and that is just not really the case.

It turns out that Tesla ( NASDAQ: TSLA ) has a little more cash than people thought. They have got a little more revenue than people thought, but basically the more cars they make the more money they burn. That is about the only relationship that Tesla ( NASDAQ: TSLA ) has to Amazon ( NASDAQ: AMZN ).

Back in the day, last century, when Amazon ( NASDAQ: AMZN ) was just selling books and the joke was, yes, Amazon ( NASDAQ: AMZN ), they lose money on every book that they sell but they are making up for it in volume, right? In this case with Tesla ( NASDAQ: TSLA ) it is kind of a different deal. If they are losing money on every car that they build, and they are, then to build more of them isn’t really going to help these guys out.

I can’t short this stock during regular times here because it is just too volatile. I will be the first to admit it, I get shaken out all the time. I have been shaken out so many times that I am just not going to do it. When you put your hand near a rabid dogs mouth and continue to get bit, after a while you leave your hand in your pocket; so that is what I am doing here.

But I will just tell you, if Tesla ( NASDAQ: TSLA ) does not stay above 300.00 tomorrow you have got to sell some calls against this puppy; you have got to sell some calls. Make them out of the money calls but sell some calls, maybe 320.00 calls in June. As of the close, and this hasn’t really changed much since the close, as of the close you can get $12.25 for those things. It will be less tomorrow morning because of the volatility contraction. But basically IF, and this is an if, if this stock stays below 300.00 you need to sell some out of the money calls, it is better than shorting the stock.

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