Short (wide) Tesla strangles next week will print

Sharing is Caring!

by BuffettGOAT

I’m not that big on being short options, but from time to time, they have some great payoffs. Tesla is in that position next week. Due to the impending finalization of the S&P inclusion, the Tesla IV has gone ballistic. It’s so crazy that you can sell the 1-week 450-850 Tesla strangle, which is like 610 now, for 300+ bucks each (so 3 x 100 multiplier). It was actually going for even more intraday today (400+) if you got on then. You can narrow the strangle even more for more money. Even a somewhat decently wide strangle is 1k+. I chose the super wide 450-850 one as an example here since I know not everyone is comfortable with the risk.

When people talk about options trading, everyone likes to talk about delta and how calls/puts will print, but true options trading is trading the volatility, and if you can afford it, some short IV position on Tesla looks like an incredible opportunity next week. It’s all about risk-reward here and although I think it’s even reasonable to even do an ATM straddle, the risk probably wouldn’t be worth it to many.

Before anyone gives me some lesson about how Tesla can skyrocket at any time, I’m quite aware of that. You can see my submitted post history from months ago describing how I feel about Tesla in detail. But this isn’t a delta trade. It’s a vol trade and if you can afford it, the reward, adjusted to risk, is insane. I’m still bullish Tesla long term as I mentioned in my past posts, but this trade is just a trade on volatility, not direction.

This trade could be done with an iron condor or call/put spreads, but it’s no where nearly as profitable because Tesla skew is so high you have to make the spreads quite wide to get a good payoff for the risk. However, it could be done too if you don’t have the ability to sell naked.

 

Disclaimer: This information is only for educational purposes. Do not make any investment decisions based on the information in this article. Do you own due diligence or consult your financial professional before making any investment decision.

239 views

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.