Tesla Motors Inc (NASDAQ:TSLA) had a good 2014 till September 2014, when the stock reached an all-time high and traded around $280. But post this high, the stock started dropping its value since then. Tesla Motors Inc (NASDAQ:TSLA) had lost more than 30% since its all-time high. The stock was gaining momentum and trading at around $220 during the beginning of this year, but after Tesla Motors Inc (NASDAQ:TSLA) CEO Elon Musk announced that the company’s vehicle sales in China has slowed down, the stock again started dropping and lost almost 15% since the beginning of this year. Is this trend going to get deeper in 2015 or will Tesla Motors Inc (NASDAQ:TSLA) stock see a turnaround? Option Action Trader Dan Nathan talked on CNBC about his options plan to gain profits out of the Tesla Motors Inc (NASDAQ:TSLA) stock.
Nathan pointed out that Tesla Motors Inc (NASDAQ:TSLA) stock has dropped more than 15% since the last trade. He mentioned that the options structure for Tesla Motors Inc (NASDAQ:TSLA) stock was originally designed to take advantage of the high implied volatility. He added that since the stock has moved down, the options structure worth has doubled.
Nathan shared his options to make money out of the Tesla Motors Inc (NASDAQ:TSLA) stock. His option assumes that the stock is going to dip further and not going above $210. He bought a $210 put at a price of $11 and he sells two of the $180 put for a price of $7. He bought a $150 put at $1. This option gives a massive profit between $180 & $150. Risk is when the stock starts trading above $210 and below $150, which he feels that it is highly unlikely.
“[..] Here’s the thing for the trade management, you don’t have to worry much on the downside because we have a lot of room down there. Really what you have to do now is think about if the starts to work back towards $200. At some point you probably want to pull the plug,” Nathan said.
He said that if the stock starts gaining and go above $200 that would be the right time to pull the plug on this options. Michael Khouw said that Tesla Motors Inc (NASDAQ:TSLA) stock could still trade lower as it looks and go right into that profit zone that Nathan pointed out.
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