Risk Defined Option Trade For Tesla Stock | Summary and Q&A

531 views
β€’
March 17, 2021
by
Investor's Business Daily
YouTube video player
Risk Defined Option Trade For Tesla Stock

TL;DR

Learn how to set up a bear call spread trading strategy in Tesla to hedge against bearish exposure and limit risk.

Install to Summarize YouTube Videos and Get Transcripts

Key Insights

  • πŸ₯³ Tesla is considered a good candidate for a bear call spread strategy due to its failure to break above its declining 21-day moving average.
  • πŸ€‘ The strategy involves selling an out of the money call and buying a further out of the money call.
  • 🚾 Traders should set a stop loss if Tesla closes back above its 21-day moving average.
  • 🌸 The maximum profit on the trade is $145, while the maximum loss is $355.
  • πŸ™‚ The bear call spread strategy allows for profit even if the stock trades slightly higher as long as it stays below the short call at expiration.
  • πŸ˜‚ Tesla's composite rating is 89, EPS rating is 74, and RS rating is 96.
  • ✳️ Options trading carries a high level of risk, and investors should practice with a virtual trading account before risking real money.

Transcript

[Applause] hey option traders for today's trading strategy we're going to take a look at a bear call spread in tesla while the market is in a confirmed uptrend at the moment some leaders remain weak traders with a lot of bullish exposure may want to start hedging their bets by adding some bearish option traits and tesla is a good candidate right no... Read More

Questions & Answers

Q: What is a bear call spread strategy?

A bear call spread strategy involves selling an out of the money call and buying a further out of the money call. It is a risk-defined strategy that allows traders to profit if the stock trades lower, sideways, or even slightly higher as long as it stays below the short call at expiration.

Q: How is the trade set up?

To set up the trade, you would need to select options contracts that expire the week of April 16, 2021. In this case, the strategy is a vertical spread. You would buy the 755 call and sell the 750 call.

Q: What is the maximum profit and maximum loss on this trade?

The maximum profit on the bear call spread trade would be around $145, while the maximum loss is $355. The spread would achieve the maximum profit if Tesla closes below $750 on April 16th, allowing you to keep the full option premium. The maximum loss would occur if the stock closes above $755 on April 16th.

Q: Is there any earnings risk with this trade?

No, there is no earnings risk with this trade as Tesla's earnings are scheduled for April 28th. The trade can be executed without the concern of earnings announcements affecting the position.

Summary & Key Takeaways

  • In a confirmed uptrend market, adding bearish option trades can help hedge against risk.

  • Tesla's inability to break above its declining 21-day moving average makes it a good candidate.

  • The trade involves selling an out of the money call and buying a further out of the money call.

Share This Summary πŸ“š

Summarize YouTube Videos and Get Video Transcripts with 1-Click

Download browser extensions on:

Explore More Summaries from Investor's Business Daily πŸ“š

Summarize YouTube Videos and Get Video Transcripts with 1-Click

Download browser extensions on: