What is a Cheap Way to get Long TSLA?

Monday,  Jul 2 of this week, TSLA traded  intraday at  364, it closed at $335. Today, Friday July 6, TSLA is trading at $308, down 15% or 56 points from Monday’s Highs! You can check the proposed reasons for this on the web or a multitude of places, so I won’t focus on the  Pundits opinions. What I will focus on is this: If I think TSLA will recover some of the 56 points it lost this week , maybe over the next 2-3 weeks, how can I get long? Better yet, how can I get long without getting my face ripped off if I’m wrong and TSLA goes down more? I have many choices to get long TSLA , but will focus on 3 popular ones. I can buy a long call or a long Vertical, 2 popular choices. Both have decent risk if I’m wrong. My third choice involves starting with a long vertical and then selling a short vertical against it where the short strike of both spreads is the same. What is this called? A  Butterfly Trade. This is much cheaper dollar wise than a long call or vertical. Can this Butterfly trade make as much money on the upside as a long call or long vertical? Usually not, but in some cases yes. I also would place this trade a bit out-of-the money on the call side if taking a Bullish stance. So going with an assumption we think TSLA can increase some over the next 2-3 weeks and recover some of the 56 points it has lost since Monday’s highs, here is the trade idea. TSLA is currently at  the 309 area.  I will use the Jul 27 Expiration, 21 Days out from now. I will Buy 1  Jul 27  325 Call, Sell  2 Jul 27  335 Calls, and Buy 1  Jul 27  345 Call for .80 Debit. My max Risk is the debit or $80. I would like the stock ideally to go near my short strike as we get closer to the Jul 27 Expiration, sort of the sweet spot. I placed my short strike at around a 30 Delta, why? A 30 Delta indicates that TSLA has about an 60% probability of touching my short strike between now and expiration. My Plan would be to hold the trade about half of the duration I am Trading . This is an 21 Day trade, so I would probably look to stay in this trade at the most, about 10-11 Days. My plan would be to make 50% of my total capital; expenditure. If I pay .80, would look to sell out at 1.20 credit. That’s my Cheap Bullish shot idea on an expensive stock like TSLA. Remember, this is a Speculative play on a Volatile stock and only would consider this trade if I had a bullish bias on TSLA over the next 3 weeks.

Dan Sheridan


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