Exploring TSLA Options
Investors eagerly witnessed the commencement of trading for Tesla Inc. (Symbol: TSLA) options on the week of May 3rd. The May 3rd expiration date set the stage for new opportunities in the market. Traders at Stock Options Channel took a deep dive into the TSLA options chain, identifying a put and call contract with intriguing characteristics.
Upon scrutiny, a put contract at the $160.00 strike price emerged with a bid of $7.45. Selling-to-open this put contract would entail committing to buying the stock at $160.00, leveraging the premium to establish a cost basis of $152.55 per share (before accounting for broker commissions). For investors eyeing TSLA shares, this approach could present an alluring option compared to the current $169.96/share price tag.
The $160.00 strike represented a roughly 6% discount from the existing stock price, positioning it out-of-the-money by that margin. The analytic data hinted at a 66% likelihood that the put contract might expire as a sunk cost. Stock Options Channel pledged to monitor these odds meticulously, generating informative charts on their platform. If the contract did expire futilely, the premium would yield a 4.66% return on the cash investment, translating to a 40.47% annualized return – a phenomenon affectionately dubbed the YieldBoost.
Visualizing Historical Performance
The chart depicting Tesla Inc.’s trade history over the trailing twelve months surfaced, highlighting the $160.00 strike’s positioning within that timeline.
Shifting the focus to the calls arena, the call contract at the $175.00 strike unveiled a $9.75 bid. Opting to sell-to-open this call contract as a “covered call” after purchasing TSLA shares at the prevailing $169.96 level implied committing to vending the stock at $175.00. By embracing this strategy, a total return (sans dividends) of 8.70% beckoned if the stock got called away at the May 3rd expiry (before incorporating brokerage charges). Nonetheless, substantial potential gains could still remain untapped should TSLA shares ascend spectacularly.
Attention swung to TSLA’s trailing twelve-month trade history, casting the $175.00 strike in a red hue for clarity.
Evaluating Outcomes and Volatility
The $175.00 strike bore a 3% premium to the present stock price, rendering it out-of-the-money by that fraction. The chance that the covered call contract might end up valueless stood at 53%, allowing the investor to retain both the shares and premium collected. Stock Options Channel vowed to monitor this probability periodically, sharing detailed charts on their website. Should the covered call contract render null, the premium could offer an added 5.74% return to the investor, translating to a 49.85% annualized boost – commonly referred to as the YieldBoost.
Implied volatility gauged at 56% and 54% for the put and call contracts, respectively. In contrast, actual trailing twelve-month volatility, considering the last 251 trade closing figures alongside the current $169.96 price, settled at 48%. For a myriad of put and call options worth exploring, investors were urged to peruse StockOptionsChannel.com for further insights.
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Author’s note: The opinions expressed in this article are personal and do not necessarily align with Nasdaq, Inc.
