By Dmitry Pargamanik
If You Are Bullish On TSLA, Here Is A Credit Put Spread, Expiring On Jan 17, To Consider
As you can see from the bottom section of the trade idea card, this strategy involves selling the 17-Jan-25 395 put and buying the 17-Jan-25 395 put.
Here Are The Highlights Of The Strategy
- Market Price (Credit): 0.90
- Theoretical Value: 0.55
- Theoretical Edge: 8.6%
- Yield Potential: 22.0%
What Needs To Happen?
TSLA Needs To Remain Above 395
At the time of this writing, TSLA was priced at 448.19. To achieve maximum profit from this spread, the stock must maintain a closing price above 395 on the option expiration date of January 17, 2025.
How Much Can You Make?
Max Profit of 0.90 Equates To A 22.0% Potential Return
In such a scenario, both puts would expire worthless, and you would retain the full credit received from selling the spread, which amounts to 0.90. When expressed as a percentage of the amount at risk, this put spread has the potential to yield a return of 22.0% (0.90 credit / 4.10 amount at risk).
What Is The Estimated Win Rate Of This Put Spread?
Estimated Win Rate Of 86%
Historical stock behavior implies that this particular put spread has an estimated success rate of 86%, but there is no guarantee or way of knowing TSLA's future performance with certainty.
What Is The Risk?
TSLA Stock Could Decline
Since this is a bullish strategy, it carries the risk of a stock decline. In this case, the break-even point on the downside is 394.10.
How Much Can It Lose?
Max Loss of $4.10 On A Stock Decline Below $390
If, at the option's expiration, TSLA's price drops below the $390 strike, both put options will be in-the-money, causing the spread to be valued at $5.00 .In such a scenario, the max loss would amount to $4.10, assuming no exercise or assignment risks.
In Summary
What Makes This Opportunity Compelling?
This TSLA bull put spread, set to expire on Jan 17, 2025, appears to have a theoretical trading edge and has a potential to generate significant returns while limiting risk.
When Should You Consider This TSLA Bull Spread?
It is important to remember that the outcome is uncertain and that the strategy is of a bullish outlook. The stock has to stay above 395 at expiration to fully pay off.
As always keep in mind that all investments carry risk, and success is never guaranteed.
Don't Let an Opportunity Pass You By!
Find More TSLA Credit Put Spread Strategies
And if you want to find more credit put spreads for other stocks, go to the bull put spread screener
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