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) - BUY
BUY the Tesla (TSLA) June 2019 $140-$150 in-the-money vertical BULL CALL spread at $8.80 or up to $9.50
Opening Trade
5-23-2019
expiration date: June 21, 2019
Portfolio weighting: 10%
Number of Contracts = 11 contracts
Tesla is now down 52% from its all-time high and is rapidly approaching levels that will attract takeover interest.
Under $150 the line of potential acquirers winds around the block and would include Apple (AAPL), Alphabet (GOOGL), Daimler Benz, and even General Motors (GM). If the Saudi government liked Tesla at $420, they have to love it at $150.
Furthermore, the short interest now stands at a staggering 32% of the outstanding float of the company. The cost of borrowing these shares to sell short is extremely high, about 30% annualized. Any effort to pare this number down could trigger an instant $100 rally.
I was at the Fremont factory last week, and business is booming. They should reach new all-time record production levels by Q4 at the latest and possibly as soon as Q3. Last week, Tesla was knocking out 900 Tesla 3’s a day and there is still plenty of demand.
So I am going to use the current extreme levels of volatility to pick up a very cautious position in Tesla and buy the June 2019 $140-$150 in-the-money vertical BULL CALL spread at $8.80 or best.
This is a bet that Tesla shares will not fall below the $150 strike price in 20 trading days by the June 21 option expiration.
If you don’t do options, buy the Tesla 5.3% 2025 convertible bonds which are now yielding nearly 10%. Even if the company goes bankrupt, you will remain whole as the bonds are senior in the debt structure. Here you generously get paid to wait for a recovery in Tesla shares.
Here are the specific trades you need to execute to obtain a $10,000 position.
Don’t pay more than $9.50 or you’ll be chasing:
Buy 11 June 2019 (MSFT) $140 calls at………….………$58.80
Sell short 11 June 2019 (MSFT) $150 calls at………….$50.00
Net Cost:………………………….………..…………........….....$8.80
Potential Profit: $10.00 - $8.80 = $1.20
(11 X 100 X $1.20) = $1,320 or 13.63% in 20 trading days.
To see how to enter this trade in your online platform, please look at the order ticket above, which I pulled off of Interactive Brokers.
If you are uncertain on how to execute an options spread, please watch my training video on How to Execute Vertical Call and Put Debit Spreads by clicking here.
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Please keep in mind that these are ballpark prices only. There is no telling how much the market can move by the time you get this.
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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 close to expiration.
If you don't get done, don't worry. There are another 250 Trade Alerts coming at you over the coming 12 months.
