Tesla Stock Breaks Below Key Level; Can It Stay In A Trading Range? | IBD

TL;DR

Tesla's stock is down 2.3 percent and currently below the 50-day moving average, prompting the use of an iron condor options strategy.

Transcript

foreign let's go to Tesla Harold it's down 2.3 percent here falling below the 50-day line for the first time in quite a while as it pulls back it had this gap down on earnings so it's continuing to digest that so talk to us about how we might look at this from an options perspective yeah so with Tesla I'm looking at an iron Condor now before the Ma... Read More

Key Insights

• 🥳 Tesla's stock is currently below the 50-day moving average, indicating a pullback after earnings.
• ♻️ The iron condor options strategy is being used to take advantage of Tesla's unpredictable nature.
• 🤙 The iron condor involves selling puts and calls while buying protective options to limit risk.
• 😐 The probability of success for an iron condor strategy is generally not high due to its neutral nature.
• 😥 The break-even levels provide potential stop loss points for the trade.
• 🤣 The iron condor strategy is managed by adjusting the trade at 21 days and monitoring for potential profit or rolling it over.
• 🛀 Tesla's chart shows logical levels of support and resistance that align with the iron condor strategy.

Questions & Answers

Q: Why was the iron condor strategy chosen for Tesla?

The iron condor strategy was chosen for Tesla because of its unpredictable nature and the desire to keep the stock within a small trading range. It provides protection while allowing for potential profit.

Q: How are the break-even levels determined for the iron condor strategy?

The break-even levels for the iron condor strategy are determined by the strike prices of the options. In this case, the break-even levels are $227 to the downside and $282 to the upside.

Q: How is the probability of success calculated for an iron condor strategy?

The probability of success for an iron condor strategy is calculated by dividing the actual risk (the width of the spread minus the credit received) by the width of the spread, and then multiplying by 100. In this case, the probability of success is 56%.

Q: How is the trade managed for an iron condor strategy?

For an iron condor strategy, the trade is managed by setting a stop loss at the breakeven levels. Additionally, a decision is made at 21 days to either close the trade for a profit or roll it over.

Summary & Key Takeaways

• Tesla's stock is down 2.3 percent and below the 50-day moving average, indicating a pullback after a gap down on earnings.

• The iron condor options strategy is being utilized due to Tesla's unpredictable nature, with the aim of keeping the stock within a small trading range.

• The iron condor involves selling the 230 put and buying the 225 put for protection, as well as selling the 280 call and buying the 285 call for protection.