Living in Northern California, I’ve seen new things. tesla Especially when I was in Palo Alto (Tesla’s Northern California headquarters) there were cyber taxis running around.
The car of the future will obviously not have a steering wheel or pedals. Personally, I didn’t notice it as I was watching him run around. But now, between Weymos and the self-driving Chevrolet Bolt EV operated by Cruise before the program ends, we’re starting to get used to the idea of driverless cars. Other vehicles look like prototypes, with visible sensors and cameras hanging from every corner of the vehicle. In contrast, the sleek CyberCab looks like it’s in the future. It’s a game changer.
In the short term, the market is a voting machine, and most options trading is short-term voting in nature. Today’s vote will be about whether a rollout without visible wheels can reposition Tesla from an “EV maker with a software story” to a world-changing company. After rising 5.4% on the day of its release, the stock closed at around $376, well below its 52-week high of around $499. So how can I play with the options?
Transaction details:
Buy the TSLA December 390 call for $32.50. Sell the October 23 weekly 425 call for $9.50 and sell the October 23 weekly 330 put for $7.30. Amount deducted: $15.70.
Over the past year, the three best-performing technical indicators for Tesla have been MACD, DMI, and RSI, in order. All three are currently bullish and prefer to buy long calls such as the December 50 delta (traders may write “50^”) 390. The problem is that they cost $32.40 per contract, or about 8.6% of the current stock price.
To make a profit at expiration, the stock price must exceed the $390 call strike by at least the premium you paid. To offset this decline (aka “Theta”), I decided to sell the closer dated 425/330 Strangle. This will raise $16.80. Theta first deals with trading. The October 23rd strangle should decay faster than the longer-term 390 call.
If Tesla rises between approximately $330 and $425 that Friday, the short option will expire and the remaining December calls will be executed on a lower basis. Depending on the stock price at the time, the short option may increase (or decrease) in price and roll out further overtime.
Of course, stock price trends still matter. Rising towards 390-410 is the base case. Shorts expire, long calls hold time value, and positions can be reset or rolled. A sharp rally above 425 by October 23rd is a great result, but it forces a short call decision – buy it back, roll it up and out, or convert the trade with an allocation. Either way, this will benefit you on the upside since you own the December calls. In contrast, a break below 330 will enable a short put. While this is not ideal, there are obvious risks to putting financing. Selling a put carries the risk of buying the stock upon exercise of the put, but at least it represents a discount to the prevailing stock price.
In this case, assuming you decide to hold the December call, remember that if the stock rebounds, you will still be owning the longer-dated December call, as it will add an upside kicker to your long position. When you sell a put, you collect a large amount of cash in your account.
Launches are limited and occur in small, unsupervised fleets. Waymo already has the scale and travel volume that Tesla can’t match yet. The Cybercab is a two-seater with no luggage, and unit economics will only improve if both usage and regulatory permits grow rapidly. But I’d like anyone to name a company that has proven they can deliver better EVs at scale than Tesla.
