TSLA's Bullish Stance And Low Implied Volatility
Tesla (TSLA) shares have recently entered into a technical uptrend. Currently trading at $258.37, TSLA sits above its 20-day moving average of $257.61. Further emphasizing the bullish trend, this 20-day average is above its 50-day moving average of $250.41, which itself is comfortably above the 200-day moving average of $207.77. Such a layered alignment of moving averages often signals positive momentum in the stock.
Another noteworthy aspect is the stock's implied volatility, which currently stands at the 33rd percentile. This suggests that the volatility is at the lower end of its 52-week range. Taking these factors into account, our aim was to identify an options setup that could capitalize on these particular market conditions.
The TSLA Calendar Spread: Breaking Down the Opportunity
A strategy that stood out to us is the calendar spread, which involves selling the 17-Nov-23 300 Call and purchasing the 15-Dec-23 300 Call. This spread was priced at a debit of $4.05 at the time of the alert.
Why We Like This Calendar Spread for TSLA
Given the current market context for TSLA, this calendar spread is positioned in a way that aligns with several appealing factors. Here's a breakdown:
- Theoretical Discount Price
By analyzing historical data on this spread and comparing the current price, it's indicating an opportunity. With a historical mean value of $5.34, the present market implies a -24% discount.
- High Potential Return
Based on ideal scenarios with TSLA gravitating towards the 300 strike and an implied volatility aligning with its historical average by 17-Nov-23, there's a potential for a significant reward—up to +383%. This makes the opportunity particularly compelling.
- Bullish Bias
The upward trajectory of TSLA’s stock price and its position relative to multiple moving averages position this spread for potential appreciation if the stock continues its bullish trend toward the 300 strike.
- Limited Risk
One of the most attractive aspects of this calendar spread is its predefined risk. While market conditions can always introduce variables, the inherent structure of a calendar spread offers a buffer.
Wrapping Up
While the trajectory of the stock and its implied volatility remain uncertain, the calendar spread, in light of TSLA's current stock trend and volatility scenario, offers a noteworthy opportunity. This setup provides a theoretical discount, an enticing potential return, and a defined risk, making it a strategy worth considering for those keeping a close eye on TSLA.
Disclaimer: This article is for informational and educational purposes only and should not be construed as professional financial advice. Trading in stocks, options, and other securities involves risks. Past performance is not indicative of future results. Always consult with a licensed financial professional before making any investment decisions. Marketchameleon and the author are not responsible for any decisions made based on the information provided in this article.
