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Ride Telsa Motors (TSLA)

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May 23, 2013 – Comments (2) | RELATED TICKERS: TSLA

 

 

Telsa Motors Inc. Credit Spread (NasdaqGS: TSLA)

 

TheOptionPlayer.com sets up a Telsa Motors (TSLA) short-term (7-day) option strategy. Investors could simultaneously:

 

Sell the End-of-May expiration TSLA $100 call for $1.45 (yesterday's closing price)

AND

Buy the $105 call at $.70 (yesterday's close)

 

The difference between funds received and paid out is a .75 per share credit which we keep if Telsa Motors closes below $100 on Friday May 31st, but immediately exit the position if it appears the price will end up higher. If the stock price gaps higher tomorrow, then we will probably initiate the call spread at a higher strike prices with the same risk profile as described above. See Guidelines page at www.theoptionplayer.com/ for explanation on how trade is set up.

                                                                                                           

Why we recommend it:

Telsa Motors Inc. (NasdaqGS:TSLA ) shareholders have enjoyed a spectacular 165% rise in stock value culminating in an all time high a few weeks ago. As evidenced in the hourly chart, Telsa Motors' shares got a huge boost when the company reported its' first profit in 10 years on May 8th and the price started accelerating higher.  Adding fuel to Telsa Motor's fire, the next day Consumer Reports announced that Motor Trend's 2013 "Car of the Year" received its' highest rating in an evaluation of the luxury sedan.

 

What probably really boosted Telsa Motor stock price toward its' recent high was a hardcore short squeeze. Prior to the earnings announcement investors had short interest in more than 45% of Telsa's shares available to the public. Share had the seventh highest short interest among Nasdaq listed stocks as of the April 15th settlement date. You can see in a daily chart how as Telsa stock rose, short sellers had to chase the price higher and higher to close out their positions. Even though the stock became severely overbought immediately after the earnings announcement, the 'shorts' had no choice but to keep bidding up the price to get out of the trade.

 

After the shorts got squeezed out Telsa stock has been trading in relatively tight trading range. Even though the major stock indexes including the Nasdaq continually made new all time highs over the past week, Telsa shares remained range bound. A recent article suggested that Telsa Motors investors should be extremely cautious as even though the company is currently ahead of its' competitors in the electric car market, the competition is bigger and better funded. And Daimler and Toyota have even enlisted Telsa help through equity stakes to help catch up! Also helping to contain Telsa stock price is the recent announcement that the company is issuing up to 3.9 million new shares at a non-discounted share price of $92.24 and also offering a convertible note to raise about $589 million. Opinion appears to be pretty evenly divided between those who believe that Tesla will continue to grow and those who believe that the company is really just another disaster waiting to happen. We are betting Telsa shares remain constrained in the short term, at the very least there is a high probability the stock will remain below the target price for another week.

 

52-Week High: $97.12

52-Week Low: $25.52

Average Volume (3 month):   5,608,980

 

 

 

 

 

2 Comments – Post Your Own

#1) On May 24, 2013 at 12:45 AM, valunvesthere (21.57) wrote:

The only place in the world where I see there's a potential market for electric cars is in China.

Firstly, for nearly a decade and counting China has been the largest automobile buyers market in the world and there's still more growth, because it has become Chinese culture that automobile ownership means you're successful. Majority of the vehicles are fossil fuel burning engines, thus making China and The United States of America the top 2 oil thirsty nations in the world.

Secondly, If the United States and the developed world can convince China to go electric and be less dependant on fossil fuels, thus less demand for oil in the world equates to lower oil prices for the United States and developed world.

Thirdly, Only the Communist Government can pass law in banning fossil fuel burning engines, thus paving a yellow brick road for electric cars in China. I doubt the government will follow through because:

1) China's already invested so much money on fossil fuel refill stations infrastructure across China.

2) China has partnered with nearly all automotive manufacturers around the world who have invested billions of dollars to set up factories in China, thus creating work for hundreds of millions of Chinese to manufacture parts, assembly, and sales for the Chinese market (not including spinoffs such as parts market, maintenance, and repairs for the Chinese market). All this equates to hundreds of millions to close to a billion Chinese employment for a few decades more.

3) Chinese consumers are value shoppers, even if the enviroment concious Chinese consumer (which there is alot) will not fork over $100,000 USD for a electric car. If Tesla decides to ship parts over to China for Chinese workers to assemble (to by pass expensive American labor) it'll still be too expensive for the enviroment concious Chinese consumer. Even if Tesla decides to have the Chinese workers to manufacture parts it'll still be too expensive, because Tesla would have to invest billions in toolings and setting up factories in China which the costs will be passed down to the Chinese consumer.

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#2) On May 26, 2013 at 7:46 AM, mattstylez (< 20) wrote:

I believe in this company.  I suggest anyone who is a nay sayer go test drive the car. It blew me away. Ive never driven a car that was this fast off the line. It beat a m5 in test runs (see youtube). I was amazed to see  the whole steering column is made by Mercedes and I read Mercedes is borrowing the battery technology to produce a electric car. 

 I loved it so much I gave a deposit to build mine and ordered it on the spot.

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