A hedged options bet on Tesla's run to continue into January
As artificial intelligence was a dominant undercurrent and significant theme in 2023, Tesla was not the name that first rolled off investors’ tongues as Nvidia, AMD, and even Intel garnish the deserved attention. As we look to prosper in 2024, I want to share my continued bullish view on Tesla as it is much more of an AI player than realized. One word we will all say (most likely at nauseum) in 2024 is Optimus (Tesla’s bipedal robot). Tesla recently unveiled its second generation of its Optimus bot. Optimus was used during Elon Musk’s Nov. 30 Cybertruck unveiling. Optimus was toting a gun and fired multiple shots on the new Cybertruck to reveal its bulletproof capabilities. It was a jaw-dropping moment to say the least. Musk said Optimus would use the same technology and software as Tesla’s vehicles, such as the Autopilot system and the Full Self-Driving computer. However, Musk has kept his Optimus cards pretty darn close to the vest saying that he was not ready to discuss the details of the program. One of the multiple benefits germane to Tesla stock would be having these Optimus bots assist on the Tesla production line. TSLA 6M mountain Tesla, 6 months In order to express my bullish view, I want to use a 1×2 ratio vertical call spread, or commonly called simply a “1 x 2”. I am using this approach as I expect a pop in Tesla’s price for the next 30 days, but I do believe the tech company will hit some short-term resistance at $300. Ratio Spread (1 x 2 ) Buying one January regular expiration TSLA $260 call option for $11.50 Selling two January regular expiration TSLA $300 call option for $2.20 each Net debit of $7.10 costing an investor $710 per spread. One of the biggest reasons an investor might want to use a ratio spread is to lower the cost of entry by buying an expensive call option and selling two call options further out of the money. Take caution as when left unhedged, this type of strategy can be directionally biased to a point as the extra out of the money call option sold eventually takes over the risk profile. The breakeven on this upside and unhedged extra call is a Tesla stock price roughly of $333. DISCLOSURES: (Long Tesla and this spread.) THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
