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) January 2023 $75-$80 in-the-money vertical bull call spread at $5.00
Closing Trade
1-20-2023
expiration date: January 20, 2023
Portfolio weighting: 20% double weighting
Number of Contracts = 25 contracts
Since Tesla shares for this spread are now an amazing $54.43, or 72.57% in the money, I think it’s safe to call this one a win even though we have two more days until expiration.
We have the good fortune to have an incredible six options positions expiring at their maximum profit points at 4:00 PM on Friday, January 20. So, you don’t get overwhelmed by getting six trade alerts all at once, I will start feeding out the accounting from now.
As a result, you get to take home $1,250, or 11.11% in 13 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 January 23 and the margin freed up.
Some firms charge you a modest $10 or $15 fee for performing this service.
Tesla Q4 Sales came in Short, delivering 405,278 and 1.3 million for all of 2023. The slight miss took the shares down an astounding 14%, a huge over reaction. That gave us a great entry point for this trade.
The stock is now selling for 22 times 2023 earnings and 11 times 2025 earnings, compared to an average of 17 times earnings for the top four tech companies. That’s an eye-popping 35% discount to big tech. It’s certainly worth taking a risk going long here for a company that is still growing earnings by 40% a year.
Tesla shares have plunged this year because Elon Musk sold an additional $3.6 billion worth of shares this month, bringing his total for the year to a mind-numbing $40 billion, according to SEC filings.
But you know what? Elon can’t sell any more stock after Friday, December 16. After that, the window closes until after January 25, when Tesla Q4 earnings are announced, conveniently five days after this position expires on January 20.
After my ballistic 86.62% profit in 2022, I am in a mood to start out 2023 with a bang, and this was the best trade I can think of to do that.
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 100,000 vehicles.
The company is generating such enormous cash flows that it is likely 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.
With this trade, I was willing to bet that Tesla shares will not fall an additional 29% in 13 trading days with Elon Musk out of the market. I am also betting that a company that is growing sales at 50% per year and earnings expanding at an incredible 40% a year will see its share price fall only 81% from its all-time high at $424 a year ago, which seems reasonable.
You will never see this again.
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.
I have known Elon for 25 years, back when he was asking ME for money, and when he realizes he has made a mistake, he pivots fast, faster than any other Fortune 500 CEO.
Tesla will remain the top EV maker for the next decade easily.
To make this trade really perfect, I would love to see the Volatility Index (VIX) well above the current $23.17. But Tesla implied volatility is already trading at a sky-high 65.54%, triple the market volatility. But you have to strike while the iron is hot. Tesla trades in its own world anyway.
This was a bet that Tesla (TSLA) will not trade below $80 by the January 20 option expiration day in 13 trading days.
Here are the specific trades you need to exit this position:
Expiration of 25 January 2023 (TSLA) $75 calls at……....….…$54.43
Expiration of short 25 January 2023 (TSLA) $80 calls at…….$49.43
Net Proceeds:……………………................….………….……….………$5.00
Profit: $5.00 - $4.50 = $0.50
(25 X 100 X $0.50) = $1,250, or 11.11% in 13 trading days.
