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

| December 10, 2014 | 0 Comments

TSLA OptionsBy now, everyone’s pretty much heard of Tesla Motors (TSLA), the world’s most popular electric car maker. However, the stock has been getting hammered over the last week or so.

TSLA shares are currently trading at $209.97, up 44% year-to-date. The stock is trading 28% below the 52-week high of $291.42 and is 54% above the 52-week low of $136.67.

Is this an opportunity to buy call options on TSLA because the stock is oversold? Or should you buy put options on TSLA because the shares have farther to fall? 

The bulls make a convincing argument…

TSLA shares have dropped for eight straight days despite essentially no negative news on the company itself. The drop has mostly been fueled by plunging oil prices.

Investors believe consumers will forego electric vehicles with gasoline this cheap, so TSLA has been selling off along with oil. However, The Model S isn’t exactly cheap. Most of the people who drive it don’t care about saving a few hundred dollars on cheaper gas. They’re driving it for other reasons.

Moreover, the company’s gigafactory is under construction and could change the way electrical storage works. The batteries are going to be huge in more industries than just automobiles.

But the bears have a compelling case as well… 

On the other hand, it’s common for alternative energy companies to lose their luster with investors when oil gets cheap. And, crude oil could remain in the $60 range or lower for quite a while.

What’s more, TSLA is a momentum stock which was already expensive in valuation terms. As investors jump ship from momentum stocks, TSLA could continue to take it on the chin.

Finally, there’s always the potential for additional competition in the electric car space. TSLA has a first mover advantage, but other luxury car makers could eventually catch up.

So is it time to be bullish on TSLA due to the recent bout of selling or do you take a bearish position because the stock was too expensive to begin with?

If you think the bulls are right, take a look at buying the TSLA January 17th 235 calls for around $2.50. 

If you think the bears are right, take a look at buying the TSLA January 17th 175 puts for around $2.00.  

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.