Tesla Motors Inc (TSLA): Ripe for a Contrarian Option Play?

Tesla Motors Inc (NASDAQ:TSLA)‘s stock has seen an unprecedented rise since May of this year when it traded below the $180 level. The stock is up nearly 50% from its May lows and the Street has only positive things to say about the stock, but as we know nothing goes up perpetually. Some people are getting cautious though and expect Tesla Motors Inc (NASDAQ:TSLA)’s stock to correct, if not come down vigorously. Well, the indicators are on their side, even if the mood of the Street is not. Almost all indicators are showing overbought signs in Tesla Motors Inc (NASDAQ:TSLA)’s stocks. So, will the stock go down?

Tesla Motors Inc (NASDAQ:TSLA)

Tim Biggam, lead option strategist at TradingBlock, thinks that Tesla Motors Inc (NASDAQ:TSLA)’s stock is ripe for a pullback. He discussed his option strategy for Tesla Motors Inc (NASDAQ:TSLA)’s stock on Bloomberg, recently.

“[...] I do have a position on in this stock and yesterday made an all time high $265.64, did pullback and closed almost near the lows of the day on that stock. Given the fact that the nine-day RSI is at the most overbought reading its been in a long time and the fact that more importantly, implied volatility i.e. the price of the options is really the cheapest ever, I am favoring kind of contrarian play here, I think we will have a short term pull back [...],” Biggam said.

Biggam discussed his option strategy for the stock, which is a spread trade that consist of  buying August 29 expiry, $255 strike Puts and selling August 22 expiry, $250 strike Put options of Tesla Motors Inc (NASDAQ:TSLA). The total cost of executing this strategy at the time when Biggam was on the air was $3.10. Biggam expects Tesla Motors Inc (NASDAQ:TSLA)’s stock to pullback to the $255 level by around next week. He also believes that Tesla Motors Inc (NASDAQ:TSLA)’s stock has got ahead of itself on the back of investors’ sentiments.


Disclosure: None

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

6 Movies That You Should Watch to Better Understand The Cold War

Top 15 Best Paying Jobs for Women in 2014

Top 6 Things Rich People Do Differently Every Day

5 Retirement Mistakes To Avoid (and Einstein’s Famous Quote)

11 Smartest People in the World

6 Films About the Financial World You Need To Watch (While “The Wolf” is Not Around)

Warren Buffett and Billionaires Are Crazy About These 7 Stocks

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top 6 Tax Scams and How to Protect Yourself

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Best 7 Online Courses to Take: Free Finance MOOCs

Top 6 Bad Habits that Promote Failure

20 Most Valuable Soccer Teams in the World in 2013

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!