Trade Idea Update: Tesla

Five days ago 19/04/23, we posted a TSLA trade idea which aimed to provide short-term protection against an expected bearish move due to earnings being reported.

Put Spread

Stock price: $181.50
buy Apr23 180 Put for $4.60
sell Apr23 165 Put for $1.00

Tesla Put Spread

Initial Trade Idea

Net cost of $3.60 ($360 per 1 lot of 100 shares)

Max Profit: $1140

Max loss: $360

Tesla (TSLA 1.28%) reported its highly anticipated first-quarter results after the market close Wednesday, and investors were not impressed. The electric vehicle (EV) leader’s shares tanked by more than 8.5% at Thursday’s market open bringing Tesla’s stock to its lowest level since January ($161.11). With the spread expiring on Friday (21/04/23) if the stock stayed below this level the long 180 puts and short 165 puts would be exercised simultaneously, resulting in you purchasing the shares for 165 while simultaneously selling the shares at 180. 

In practise, you would normally sell your put spread for close to $15 being the difference between the two strike prices.


Friday 21/04/23 

With the stock trading at 164.90 towards the close of the market, the 180 puts were valued at $15 and the 165 puts were trading at 0.20 cents. We closed the trade at these levels to avoid having to buy and sell TSLA shares with the exercise of the options. 

Initial outlay $360 

Total profit $1120 (311%)

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