Investment and Options Strategist
Summary: The article discusses Tesla's upcoming earnings release for Q2 2023 and suggests three potential trading strategies based on different market views. The market expects a significant up or down move of around 8% in Tesla's stock price following the earnings announcement.
Bullish: Vertical Put Spread
If you're bullish on Tesla, consider a vertical put spread. This strategy involves selling a put option while simultaneously buying another put option at a lower strike price. The goal is for the stock to stay above the strike price of the sold put.
Here's the setup:
If you think that Tesla will stay in the expected move range right after the earnings, consider an iron condor. This strategy involves selling a call spread and a put spread on the same stock with the same expiration date. The goal is for the stock to stay between the strike prices of the sold options.
Here's a possible setup:
Reason | High Implied Volatility (IV) due to numbers out on 19th July after market close |
Expectation | Limited movement in Tesla shares after releasing the figures and imploding IV |
BEPs on expiry | Profit between $248.89 and $311.11 |
Max Risk | If you get a premium of $1.11 the max risk/loss would be $5 - $1.11 = $3.89 per share. 1 contract = 100 shares. Max Risk/Loss = $3.89 * 100 = $389. |
For Who? | Only for clients to adhere to the view that the numbers will not cause a move outside the expected move in the share price of Tesla |
Trade set up | Sell the Iron Condor in the last 1 – 4 hours of trading on Wednesday 19th for around $ 1,45 - $1,50 (stagger in case of bigger positions) |
Closing | A GTC (Good Till Cancelled) order to close the position at $0,30 (stagger in case of bigger positions) |
Emergency | If there is a big move in the underlying outside the bandwidth of the long strikes, monitor closely and close position latest on the 21th of July 2- 4 hours before expiry |
Probability of Profit | 79.12% |
Expected Move | for 21th July ’23, based on ATM straddle: +/- $22.61 |
IV Rank | 21.64% |
If you think that Tesla will drop after the earnings-release, consider a vertical call spread. This strategy involves selling a call option while simultaneously buying another call option at a higher strike price. The goal is for the stock to stay below the strike price of the sold call.
Here's a possible setup:
The net premium received for this trade setup is $154 (the difference between the premium received from the sold call and the premium paid for the bought call). The maximum risk for this trade is $346, which is the difference between the strike prices minus the net premium received. The maximum profit is the net premium received if TSLA stays below the strike price of the sold call ($290) at expiration.
The breakeven point for this trade is $291.54, which is the strike price of the sold call plus the net premium received. This means that TSLA needs to be above $291.54 at expiration for the trade to be profitable.
The trade has a probability of profit of 61.79%, and the implied volatility rank is 21.64. The position delta is -0.0706, and the position theta is 0.0727. These Greeks indicate the sensitivity of the position to changes in the stock price and time decay, respectively.
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