SteadyOptions is an options trading forum where you can find solutions from top options traders. TRY IT FREE!

We’ve all been there… researching options strategies and unable to find the answers we’re looking for. SteadyOptions has your solution.

The Less Risky Way To Trade TSLA


Tesla reported earnings this week, and the stock took a hit due to weak guidance. The bears will tell you that this is the beginning of the end. The bulls will see it as a buying opportunity. No matter how you see it, there is no doubt that this is a very risky stock, both for the bulls and the bears. As a non-directional traders, we don't really care. I would like to present a less risky way to trade TSLA, with a good chance to make money no matter what the stock does.

TSLA also became very emotional stock. Many people cannot separate their love/hate for the company from the stock. No doubt that standard valuation methods are not applicable to TSLA. Fortunately, with our strategy, we don't have to do it, and we couldn't care less if the stock is undervalued or overvalued.

 

So here we go.

 

tesla.jpg

 

About a month before earnings, we entered a double calendar spread on TSLA at $2.80. The thesis is to take advantage of volatility skew between different options expirations.

 

Two days before earnings, we closed the trade at $3.94. That's 40.7% gain. The trade actually reached 4.70+ on the last day and could be closed for 60%+ gain. Some of our members entered earlier at lower prices and booked even higher gains.

 

This is a strategy we have been using very successfully for the last two years, and TSLA is one of the best candidates for that strategy. Here are the results of the last 8 trades:

  • Aug. 2015 - 40.7% gain
  • May. 2015 - 33.5% gain
  • Feb. 2015 - 28.1% gain
  • Nov. 2014 - 30.8% gain
  • Aug. 2014 - 36.8% gain
  • May. 2014 - 26.1% gain
  • Feb. 2014 - 26.2% gain
  • Nov. 2013 - 23.2% gain


That's cumulative return of 245.4%. During the same period of time, the stock gained around 60%. Our strategy beats the stock holders by 4:1, without taking any directional risk!

 


Of course no strategy is without risks. The main risk is a pre-announcement, which would result a big stock move. If the stock moves too much before earnings, the trade will suffer as well. However, due to the unique setup, those calendars are more resilient to a big move than "standard" calendars. In fact, couple of times the stock moved more than 10% before earnings, and the trade still was a winner.

 

Pre-earnings calendars are among our most successful strategies. We implement it mostly on high volatility stocks like GOOG, PCLN, LNKD, FFIV, NFLX, FB etc.

 

Related articles:

 

We invite you to join us and learn how we trade our options strategies in a less risky way.

 

Start Your Free Trial

What Is SteadyOptions?

Full Trading Plan

Complete Portfolio Approach

Diversified Options Strategies

Exclusive Community Forum

Steady And Consistent Gains

High Quality Education

Risk Management, Portfolio Size

Performance based on real fills

Try It Free

Non-directional Options Strategies

10-15 trade Ideas Per Month

Targets 5-7% Monthly Net Return

Visit our Education Center

Recent Articles

Articles

  • Option Order Execution Tips

    As a community of option traders, we all can relate to the occasional challenges of order execution. Best practices for avoiding errors as well as techniques for better potential execution will be the focus of this article.  Like countless others in the Steady Options community, I personally have traded thousands of option contracts over the last decade.

    By Jesse,

    • 7 comments
    • 599 views
  • What Trading Can Offer To A Newcomer

    For any first-time investor, one of the most important questions to ask is “why are you doing this?”. Getting into investment can be thrilling and open up new worlds for you, but it can also be draining both physically and emotionally, with long days and sudden market moves always a genuine risk.

    By Kim,

    • 0 comments
    • 100 views
  • Updated: The Performance Gap Between Large Growth and Small Value Stocks

    Eight months ago on July 21st 2020 I posted an article, The Performance Gap Between Large Growth and Small Value Stocks. Over the long-term small cap value stocks have outperformed large cap growth stocks, although not over more recent history.

    By Jesse,

    • 0 comments
    • 262 views
  • 6 Ways to Invest Your Money That Aren't Cash Savings

    It’s always a good idea to keep some of your money in cash so if there is an emergency and you need money in a hurry, you can access it without having to worry. However, cash savings are not your only option if you have money left over at the end of the month, and there are a lot of other options that could bring greater returns.

    By Kim,

    • 0 comments
    • 318 views
  • Jade Lizard Options

    The jade lizard is one of those bullish spreads with limited maximum profit, and no risk on the upside. It is a combination of a short put with a short call spread . The credit this creates is higher than the span of the spread. To set this up, two actions are required:

    By Michael C. Thomsett,

    • 0 comments
    • 546 views
  • Are Your Emotions Trying To Tell You Something?

    As a trader, you may find yourself frequently trying to ignore or rationalize emotions.  You may have even created your own “solutions” to manage them. You exit early to lock up profit and avoid a potential blow-up if the trade turns against you.

    By Jared Tendler,

    • 0 comments
    • 360 views
  • Stock Trading Basics: 5 Rules for Successful Stock Trading

    You might be a stock trader, or just interested in learning more about how to trade and make the most out of your stock investment. Regardless, successful stock trading is not that easy. You must first have the financial capital to start and a very great endurance for risks.

    By Kim,

    • 2 comments
    • 505 views
  • Hourly Financial Advice for DIY Investors

    A large percentage of the Steady Options community consists of do it yourself (DIY) investors who prefer to manage their own trading and long-term investing accounts. This is a great way to gain firsthand experience about how markets work, but at times it may be beneficial to get professional input on investing and other personal financial planning decisions.

    By Jesse,

    • 0 comments
    • 309 views
  • Seagull Spreads

    Some varieties of call and put spreads are also called seagull spreads. It is so called because it contains a body and two wings. If the body is short, the wings are long, and vice versa. This 3-contract strategy includes two calls and a put, or two pouts and a call.

     

    By Michael C. Thomsett,

    • 0 comments
    • 435 views
  • Are Hedge Funds Good Investment for You?

    Right now, people are feeling at a bit of a loss as to what to do with their money. Those who usually invest are probably well aware that the market is pretty tricky right now. During unprecedented times, there are often unprecedented outcomes when it comes to investments.

    By Kim,

    • 0 comments
    • 436 views

  Report Article

We want to hear from you!


Hi 

Can you please tell about the setup of the 4 legs of the double calendar, the Strikes and expirations etc.. What was the IV when your entered and exited the trades ?

 

Share this comment


Link to comment
Share on other sites

Will not the short legs rise in vol and the skew increase due to earning week and this could hamper the trade? Yes the back legs will also increase but not as much as the week of earnings. You seem to have had success always picking the short legs on the week of earnings - does this work in all cases? or is it a better strategy to have the short legs expire the week before.

thanks for your input

Share this comment


Link to comment
Share on other sites

No it won't work in all cases. This is why we do extensive backtesting to find the best stocks suitable for this strategy and the optimal entry prices.

Short leg exiting before earnings can work as well, but it will be much less resilient to the stock move. I would consider it higher risk trade. Our trades are much more resilient and in some cases the trade can make money even if the stock moved 10% or more.

Share this comment


Link to comment
Share on other sites


Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account. It's easy and free!


Register a new account

Sign in

Already have an account? Sign in here.


Sign In Now

Options Trading Blogs Expertido