SURPRISE! Tesla (TSLA) has made some noise recently!
Not that it hadn’t made enough over the past few years!
But going from $900 to $1200 in a matter of 2 weeks is surely a chart worth looking at:
And now, this wild stock is set to report earnings sometime in late January.
Here’s Ben Sturgill’s hot and interesting take on what happens next.
We can all have a big argument over what happens to Tesla next.
TSLA bulls out there will surely say the stock has more room to go, while the bears will yet again point out the seemingly never-ending pump.
Ben Sturgill happens to fall into the former group, but he’s not going faithfully and blindly long.
As he pointed out in The Workshop – his live trading room – Ben thinks TSLA is just too hyped up and the recent record delivery numbers have attracted too much attention for the public to ignore.
Thus, he believes the stock may have another run-up into the earnings, but this is NOT a “conviction trade” – Ben doesn’t want to take too much risk.
And he’s right – there’s too much uncertainty in TSLA right now, one has to be very careful with the risk on both sides.
So what does Ben pick to do? He trades an options spread:
A Call debit spread is a strategy that allows you to bet on the stock’s upside while protecting your bottom line.
You enter the position by shorting one more expensive call ($1200 in Ben’s case) and buying a cheaper call to hedge ($1250 in Ben’s case).
As a result, Ben can collect the spread between two options and exit if the stock moves slightly higher – precisely, what Ben thinks TSLA will do into earnings.
Best yet, Ben is protecting his bottom line – the cheaper call he buys limits his downside risk.
Let’s see how this one plays out over the next few days.