Is TSLA Starting to Shift?
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Is TSLA Starting to Shift?

Henry Gambell - February 16, 2016

Good evening, everyone. This is Henry Gambell with Simpler Options, and in today's free video I want to take a look at Tesla. The interesting thing about Tesla (TSLA) here is it is a conflicted chart. So, from one perspective, taking the bearish approach would be understandable because it has broken a fairly serious area of support, and we do have a weekly squeeze that has fired short.

So that's the bearish case for it, but there's also a bullish case to be made in relationship to its decline in time, and the fact that it has also made a 1272 extension of a previous swing. So, both sides could be discussed, but another thing that I have in the back of my mind on this is that into monthly expiration, you can see this kind of grind higher to help all the premiums that were sold the week prior start to expire. We also take a look at having a voodoo line or a key part of this support that comes in here around 143. So, we've come down and found a key area of support, rallied from it, we've made the case for both sides of this.

The next thing that I start to consider around the monthly expiration is, where does my open interest lie? We'll step out into the February monthly contracts here, and you can see that while it's not a huge stand-out, and I find that this does--it's a little more helpful if you'll review it right there on Thursday prior to the close. Wednesday and Thursday.

It's just nice to see that those contracts are currently still open. But you can see how there's a bulk of the 150 put options. So, if they have a vested interest--assuming that funds were the ones that sold these--a vested interest in those expiring worthless, then it's one more story to help back the idea of TSLA sustaining bid into next week. Maybe it doesn't make a massive recovery, but if it can at least bounce, what type of strategies can we play out of that?

The most straightforward that I would look at would be the vertical. Selling the 150, then buying the 145. If you can get that for about a $2 credit, I think that would be a decent spread.

Then the other that I will be looking at on Tuesday is an unbalanced butterfly. I want to do this $5 wide. The reason that you can look at this strategy in addition to the put credit spread, this is less of a credit. If the underlying just explodes higher, so you'd say, "why do you have any interest in taking less of a credit on a similar idea?" And this is because the underlying can pin for you, or if it can truly sit there and consolidate at 150 on Friday, this trade has much more of a profit potential. So, where the other one can only take in the $2 credit or so that you would sell it for, this can actually make closer to $5. So that's a trade that I'll be looking at on Tuesday. I'm going to use that strategy on a lot of various markets.

Hopefully you found that helpful. One other thing I want to make you aware of is a webinar that will be with Raghee Horner. The strategy portion of her course will be on Thursday, February 18, and then you have live trading on the 19th, so this is going to be on Navigating Volatile Markets. Raghee is one of the best currency analysts that I have ever followed, and has really been a great asset to my trading. I'm very interested to see what she has to say about the current market environment. If you're interested, you can sign up using the link that you'll see after this course. I will see you at the next free video.