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) – EXPIRATION AT MAX PROFIT
EXPIRATION OF the Tesla (TSLA) February 2023 $220-$230 in-the-money vertical bear put spread at $10.00
Closing Trade
2-17-2023
expiration date: February 17, 2023
Portfolio weighting: 10%
Number of Contracts = 12 contracts
We have the good fortune to have three options positions expiring at their maximum profit points at 4:00 PM today. So you don’t get overwhelmed by getting three trade alerts at once, I will start feeding them out now.
This position took advantage of a sky-high implied volatility for Tesla options at 92% which have since fallen sharply.
As a result, you get to take home $1,320, or 12.36% in 14 trading days.
Well done and on to the next trade.
You don’t have to do anything with this expiration.
Your broker will automatically use your long position to cover your short position, canceling out the total holdings.
The entire profit will be credited to your account on Monday morning, February 21 because of the Presidents Day Holiday and the margin freed up.
Some firms charge you a modest $10 or $15 fee for performing this service.
This trade was looking like a shoe in on Monday when the stock traded down to $189. Ford Motors then gave the gift of gifts, shutting down their F-150 Lighting production because of battery design flaws. Tesla shares soared by $28, or 14.8%.
The Lighting is the most serious challenger to Tesla’s near monopoly on EVs. Battery design flaws are not something that go away quickly and will damage Ford’s long-term credibility in the sector.
As much as I love Tesla for the long-term, the stock is wildly overbought for the short-term, up 115% in six weeks. It is the greatest six-week creation of shareholder equity in stock market history, some $360 billion.
I was getting ready to stop out of this position on Thursday when Tesla announced a recall of 363,000 vehicles with autonomous driving to hit out maximum profit.
Welcome to the options market. Tesla certainly earns its now sky-high 78% implied volatility.
Tesla is now the most widely owned stock in the world and accounts for a staggering 6% of the options market. With an eye-popping 78% implied volatility compared to only 19% for the Volatility Index ($VIX) those figures should rise.
Elon Musk really checkmated the rest of the EV industry with his 20% price cut, which is 35% after adding in newly qualifying government subsidies. This morning, Tesla will still be the most profitable auto company in the world, even after the price cuts.
Ford Motors (F) threw in the towel and cut the price of their EV Mustang by 10%. The problem is that other EV makers lack the parts for an aggressive market share strategy and lose money on what EVs they do make.
Tesla Q4 Sales Came in Short, delivering 405,278 and 1.3 million for all of 2023.
Tesla shares plunged last year because Elon Musk sold an additional $3.6 billion worth of shares in December, bringing his total for the year to a mind numbing $40 billion, according to SEC filings.
With this trade I was willing to bet that Tesla shares woud not rise above $220 by the February 17 option expiration in 14 trading days. That would be 120% above the January 3 low for one of the world’s largest companies.
Tesla will remain the top EV maker for the next decade easily.
Here is the specific accounting you need to close out this position:
EXPIRATION OF 12 February 2023 (TSLA) $230 puts at……...….…$28.39
EXPIRATION OF short 12 February 2023 (TSLA) $220 puts at…….$18.39
Net Proceeds:………………………….……...............…………………..………$10.00
Profit: $10.00 - $8.90 = $1.10
(12 X 100 X $1.10) = $1,320, or 12.36% in 14 trading days.
