One Month Later: Update on TSLA Calls

I wrote a piece on trading options of Tesla Motors Inc. (NASDAQ:TSLA) for profits a little over a month ago on August 5. I that piece, I reiterated my obstinately bullish position on Tesla as I envisaged more upside potential on the stock of the electric car maker due to its anticipated increase in production.

When I wrote that piece, shares of Tesla were changing hands around $234.47 per share. I recommend buying TSLA calls thus “I am reiterating my position on the TSLA Jan 2015 200.000 call (TSLA150117C00200000) at an asking price of $48.00. The contract has a delta of 70, which suggest a move of about $0.70 for every $1 move in shares of Tesla. I have a $60 price target on the contract in the next 3-5 months.”

One-Month Performance

TSLA Stock Chart

The chart above shows how shares of Tesla Motors have traded within the last one month when I recommended buying call options. The stock is up 17.72% as you can see from the chart and it made a new 52-week high to $291.42 within the same period.

The options contract that I recommend at an asking price of $48.00 has spiked 68.23% to an asking price of $80.75 today. More interesting is the fact that contract is 34.58% above my $60 price target and we still have about 105 days left before it expires.

Why Shares of Tesla are Surging

Shares of Tesla are still cruising from the momentum of the impressive second quarter results that was released on July 31. Nonetheless, a couple of other reasons have been responsible for Tesla Motor’s continued bullish trend.

One of such bullish factors is the multiple hints that Tesla could have a self-driving car in three years, all Tesla cars would be outfitted with an auto-drive feature at a point and that Tesla could sign a new deal with Toyota Motors.

Elon Musk dropped these hints at the delivery of the first set of Tesla’s Model S cars to customers in Japan earlier this week. I posit that Tesla’s entry into the Japanese market and the optimistic hints provided by Elon Musk have further increased investor confidence as they caught on Musk’s contagious optimism that the company is headed towards greatness.

For instance, the vision of a Tesla driverless car in three years is likely to become a reality right about the same time that Tesla will begin production of batteries in its Gigafactory in 2017. The hint of another deal with Toyota invariably opens the possibility of more revenue stream to Tesla beyond the sale of vehicles. You will remember that Tesla and Toyota have an agreement in which Tesla provides Toyota with motors and batteries for its RAV4 electric SUV. The agreement is expected to end this year and the hint of another agreement shows that both companies are moving in the right direction.

How to Trade Tesla Options

From my earlier coverage of Tesla here, here, here, and now, it is obvious that the stock is an attractive options play to trade. The gains recorded in the Jan 200 Calls might tempt you to cash in while we still have about 105 days until expiration.

However, I strongly believe that we can still ride this bull higher since an RSI of 67.91 shows that the stock is not yet overbought. If you are new to the TSLA Call party, it is already too late to buy the Jan 200 call, but you will do well to buy the TSLA Jan 2015 300.000 call (TSLA150117C00300000) at an asking price of $18.00.

Photo: Duncan Rawlinson. via photopin cc

— Daily Option Alerts

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