Call Options Or Put Options On Tesla Motors (TSLA)?

| April 3, 2013 | 0 Comments

Tesla OptionsTesla Motors (TSLA) develops electric vehicles and electric vehicle powertrain components.  The company sells its popular cars through a network of stores (more like galleries) and over the Internet.   

TSLA currently trades for $44.34 per share.  The shares are up an impressive 74% from the 52-week low of $25.52, but the stock is just 5% below the 52-week high of $46.68.   

Is this an opportunity to buy call options on TSLA after they announced they would be fully profitable this quarter?  Or should you buy put options on TSLA because of the intense amount of competition in the automobile industry?

The bulls make a convincing argument…

Tesla surprised everyone by updating their first quarter guidance to show full profitability for the first time.  That’s a huge deal for an electric vehicle company – especially since no one is really sure if electric cars will be gain any significant market share.

The company was projected to sell 4,500 units over the period, but ended up delivering 4,750.  What’s more, Tesla plans on paying back its Department of Energy loan of $465 million a full five years early.

Basically, TSLA has done everything right so far.  It’s a well-managed company with a popular product and a growing list of believers.

But the bears have a compelling case as well… 

TSLA is one of the “it” stocks these days.  It’s actively traded by all types of traders and investors.  But, that includes short sellers.  In fact, 44% of the float is sold short right now.

Yes, that could result in a short squeeze.  However, if bad news does come out, there are plenty of sellers to keep pressure on the stock.

More importantly, there’s immense competition in the automobile industry.  TSLA is up against gasoline-fueled vehicles, hybrids, other electric vehicles from major automakers, and even vehicles fueled by natural gas.

If TSLA isn’t able to maintain its trendy brand image, the company could be in trouble – particularly with so many cheaper alternatives on the market.

If you think the bulls are right, take a look at buying the TSLA May 2013 $48.00 calls for around $1.45.

If you think the bears are right, take a look at buying the TSLA May 2013 $37.00 puts for around $1.40.

Yours in Profit,

Gordon Lewis

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Category: Call Or Put Options?

About the Author ()

Gordon Lewis is the Chief Investment Strategist and editor for the popular daily newsletter – Options Trading Research. He’s also editor of our dynamic theme-based options trading service, Advanced Options Adviser, and one of the key analysts behind the highly successful Options Trading Wire.