How to Play Tesla With Options

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Dec. 24 (Bloomberg) –-'s James Ramelli discusses his options play for Tesla on Bloomberg Television's "Market Makers." (Source: Bloomberg)

Around tesla.

How are you playing this one question were if we look at the price action over the past couple of months, there have been two main factors putting pressure on the stock.

One of them is his concern over the safety of the model s. they had this five-star safety rating which was the highest of any vehicle on the road.

Then we had those fires and the national traffic safety administration said they are reaffirming the five-star rating.

Not a lot of reason for the shorts to be involved in this one.


Any good news is going to send this stock higher.

In the last couple of days of the year, a lot of fund managers are going to want to buy tesla at these lower levels.

It did gap lower after their earnings report because they want to have this name on their books.

The stock is up 350% this year and this is going to be one they want to have on their books when it comes time to report at the end of the year.

I think the upside is the way i want to play this one.

It's going to test back up where it got from and if we get a breakout from that level, it could pass its all-time highs.

Even know tesla is that more than 350% since the start of the year, you think they are in for a santa claus rally.

Walk me through the exact numbers.

What is your options trade?

I want to look at this with a little further out.

With tesla being a high volatility stock of these options are generally looking expensive.

So i want to play this through a call spread.

I want to look at the 175 to 195 call spread.

I can do this for around five dollars, risking $500 to make $1500 should the stock test above its old all-time highs.

It's a great reward to risk set up here and a great time to be right.

You think they could hit an all-time high but it's trading at a level of about 300. aren't you worried tesla could be overvalued?

That was the argument for the shorts all your goal -- all year long and it never seemed to pan now.

It trades more like a momentum stock.

I think this sets up really well with the 321 reward to risk ratio.

Tell me more about why you chose the june horizon.

Why not trade around march and layout the earnings cycle?

I want to capture the earnings cycle but i want to capture the overall trend.

The stock did not do well on the last time with earnings.

I want some extra time to be right here and by using the call spread, i can buy the extra time rather cheaply.

Thank you very much.

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