Tesla Million Dollar Trade
Learn To Trade Options with John Carter. Get options trading strategies and options trading tips from a professional options trader. Simpler Options provides a daily options trading newsletter with video analysis to explain option trading and help in your understanding of options trading.Option Trading Strategies | Online Training | SimplerOptions.com
Home    Free Options Trading Videos    Become a Member!    Blog    Refer A Friend Program    Login
home | Free Options Trading Videos | Tesla Million Dollar Trade

Tesla Million Dollar Trade

John F. Carter 1/16/2014

Hey everybody, good morning. This is John. It's 8:25 in the morning. I'm Pleased to see that Tesla...well so far is gapping up. I don't know if this thing will gap and crap or not. You can see I've got 5000 more shares here. I'll hold on to that. And then of the options. And so what I want to do for sure is dump some of these options at the open, and don't look a gift horse in the mouth. So this is what's left here.

How I do this -- especially what I like to do on something like this, when you have larger number of positions is you find what you have here like the 145 calls, the ones I'm concerned about the most -- 145...no that's not the right one -- I gotta hurry because we're opening in 4 minutes. So here's the -- I know I can do this. OK. 150 calls, and 145 calls. OK. Right now the theoretical price -- and if you ever wonder like where are they going to open, theo price is showing you that pre market is 25 bucks. So obviously, there's some decent profit there.

Now what I want to do is put this into a T&S chart and with this many contracts is then set it up like this. So here's the option. OK. And then when the market opens in 2 minutes and 30 seconds, I can sit there and I can see the bid ask because it'll be -- of course the worst case scenario this morning, or the nightmare scenario would be, you know, TSLA opens and just sells off 20 points like a mother. I don't think that's going to happen, OK. But I do want to be quick on the trigger with some of these options. Now, I've got that one so I'm going to go through. I've already got the stock on its own active trader chart. What I'm planning on doing is keeping these options that expire in 9 days...use more of a trailing stop approach with those. But I do want to get rid of all of this stuff.

So essentially I'm dumping like 90 percent of this position -- don't want to look a gift horse in the mouth. You can see that you know, look at this. It's getting a little volatile there. So this could be a little touch and go. So I'm going to do the same thing for these 150s. We've got a minute and a half here. There's the volatility kicking in...awesome. Nothing like a little pre market stress. Let's see, so I'm going to set up another chart there. So now I've got another active trader window here and that's got those 150 calls. I'm going to drag this over here. OK. So now I've got everything set up.

Now if I was smart one thing I could do here is -- I've got a minute left -- is at least just place an order here. I'm in the extended session. You know, this is where I was hoping that we were going to go. And let's just go ahead and I'll place an order here to sell 2000 shares there, 2000 shares there. And looks like a hundred shares got picked off so let's see...keep a thousand token shares. And so now we're going to open up in 47 seconds and let's see what this thing's going to do. So we were as high as 172.36 so -- and this looks kind of daunting but we're down you know, $2.36 off the highs. But again the only -- the main thought right now given that it scares me -- is that Tesla just dumps like a mother at the open. Because obviously I can see the theo price on those options, right. And I know what the potential profit is on this trade and I don't -- you know, I don't want to be the greedy little piggy and watch it all go away. So I'm going to have to move very quickly here. And you know, this is selling off. I mean definitely some profit taking here in Tesla. Or you know, somebody issued something. So we'll keep this here. I'm going to do this off screen. What we can do is we're going to watch the options here, you can see the prices. OK.

So now we're open -- so obviously a big jump in a lot of these option prices. I'm going to see -- let's see if Tesla stabilizes for a minute...if the options are even trading yet. So really again, the big one here -- this is the one I have 500 contracts in. So you can see it's opened up. I need to -- you know I need to man up here and start getting out of this. Now luckily Tesla's not like falling off a cliff or anything like that right here. But you know, I do want to start throwing some orders out there. And I want to be careful because if Tesla starts falling like it is now, I don't want to dick around...you know, I don't want to be a dick for a tick here. I want to get out.

Let's see here -- and look at this -- Tesla's coming down pretty hard. I don't want to screw around with this. And it may bounce. It's like on -- I'm just dragging this stuff down. Let's get out of this. This is an uptick here guys...just an uptick, that's all we want. All right. There we go. So let me get this detached here. I want to put this right here. OK. So this is good. So at least it's kind of, you know, not completely falling off the cliff here. All right. Let's give this a minute. Again this is kind of you know, take a little ease off here.

You know got rid of 5000 shares, got rid of 200 options but I still have some left. And like I said, I don't want to look a gift horse in the mouth. I mean obviously this is a pretty sweet additional trade. I got 301 contracts there. We are starting to stabilize here a little bit. Again, I do plan to keep these hundred contracts here. And I'm not sure what that was. OK. So that's good. So we're coming back up -- and that's the fire line by the way. So that's good. Now if you look at this and say, well gosh John if you had been a little bit more patient, you know you could have gotten a little bit better price for the options. Well, I mean you know, we got these for $6.70 and now they're 23. I don't want to be a -- do not be dick for tick. Target is met. All right. So let's come up here. We're right at that fire line there. OK. So that's interesting, so we are pushing through it pretty good. So let's do -- I'm going to throw an order here at 25. let's see if we can get out at 25. Obviously I want to keep an eye on this. If we keep punching up then I should get filled. But I'm going to watch this because if it starts turning over I don't want to be you know -- don't be dick for tick. All right. So it's right at the -- I mean this is down. We're right at the fire line.

We should -- so I'm looking at here, the fire line was a good target but we also -- a lot of times we'll come up and hit that high. So as long as it's punching up here, I'm fine. As soon as it starts to roll back over I just want to bail. And it's nice there, we got 25s...25, so that was sweet. And that's awesome when that happens. So we got out at 25 on that one. So now... now if we come back to this, now I can relax a little bit. So I had you know, 5000 shares and 500 options. So my Delta was 75000 per point and now it's dropped to 30000 per point. OK. So that's...that's better. And now we're falling again. So I just you know, I just want to be out. Now on this one... let's just get out of this one. Let's try 24 and a quarter, and we're out of most of it. OK. I've got one contract left so I'll keep one token contract. Had an odd lot there. All right.

So if we come back here I've still got the 150s. Those 110, now that was the one we did in the room yesterday, so that's up a hundred percent. That's nice. Let's bring this other window up. And again, let's get out of here. So I got 110 of these. So let's do a hundred and let's try 20 bucks. See if we can get 20 bucks. And don't want to be too cute here but I'm watching Tesla over here and it is pushing higher. Push...there we go. All right. So now I get into the mix of this.

What happens now is it takes the stress off. The stress of, wow I gapped up 10 bucks, this turned into a monster trade and that one you can give that up. But then leaving a little bit left. So I'm out of like 90 percent of my position now. And then leaving just a little bit left in order just to trail it. OK. And it just becomes pretty sweet. So these 150 calls that expire in 9 days, I don't want to touch those. You know, I can give those a little bit more leniency. We did that 160, 155 put spread yesterday. Obviously we can just kind of you know, in theory those will just expire worthless. I've got 10 of the 150 calls left, 1 of the 145 calls left. Those are some puts that I sold and I've got a thousand shares. So at this point we've got some wiggle room.

The key is you know, the ducks were quacking this morning. We fed the ducks and now we can just do you know, trailing stops on the rest and look for the next set up. Now one thing that I'll be doing today is after -- that was -- I think I told you guys that yesterday -- this is the biggest overnight trade I've ever done. We had a million dollars in open profits yesterday and today another 590 thousand. So you know, I mean that's pretty good work for a day and a half.

One thing that I know about myself is that I gotta be very careful after a big trade, about getting euphoric and thinking, oh my god, I'm the best trader on the planet. And I know myself enough to know that that's a serious danger. And so the last thing that I'm going to do today -- now I'll place some more trades today but I'm going to I'm going to limit myself to 10 contract trades. So 10 lots. And that's to battle euphoria. And if I'm talking here and it sounds like oh, I sound pretty calm, but you know on the inside as a trader you're like, oh, hell yeah. That was awesome and I want to do it again. But I don't want to mistake the combination of skill and luck for pure skill. OK. When you get a trade like this, yes there's skill in identifying it. But there's also luck that it actually went up you know, $20.00 a share in the course of you know, 24 hours. All right. So hopefully that all made sense. And now let's see what's cracking today.

All right. So now it's the end of the day so let's recap this trade. So this obviously worked picture perfect. You know, we had that nice move up... 0 point gap up and we couldn't have asked for anything else. And what's nice about this is that even though it sold off here pretty hard, it actually gave plenty of time to get out of this. I think you guys saw me get out of most of my position there at the open. Let's see...one minute, there we go. So you know, we had this and then it kind of came down but you know, we had plenty of time to get out. So this is 1,2,3,4,5,6,7,8, you know, 9, 10 minutes, even about 15 minutes right above that. And that was the target and so plenty of time to get out and that was nice.

At this point I've got -- I'm out of 99 percent of that position. I just didn't want to think about it anymore. I've got, I mean a token 10 contracts that I'm going to hold into next week and book some additional profits today. And again, the biggest trade, we ended up now -- in this case it was right at a million yesterday and it ended up at 1.5 and obviously that's -- you know, I'm very pleased with that. And at this point, you know part of this is for the rest of the week...just kind of you know, not getting too euphoric about that and then starting to do stupid stuff. Just do some small trades, kind of get back into it and just going back to the -- you know, it's going back to the factory work. You don't want to get too crazy with this. Because that can...you know, that can hurt too. And so that was all fun.

A lot of people have asked, you know, hey what about -- how did you find this trade and all that stuff. And what this kind of trade is, it's called a pre earnings announcement. And I'm going to cover this in detail on Saturday. And we are in the middle of earning season. We're going to set up this class. You go to simpleroptions.com/earnings, and you'll see here one of the things I'm going to be talking about is pre earnings announcements. OK. And that's what happened with Tesla. And those -- especially in a stock like that with high, short interest it becomes a very powerful play. So I'll be talking about how to identify that. I'll be going through step by step, how I did that Tesla trade, how I managed it, how much I risked, you know, when to actually push it, when to use normal size, etc. And then the three other strategies -- so that was 1, 2, will be strategies that are about three weeks before earnings. And then of course there are strategies, day of. And then 4 -- this is a fun one -- is directional strategies, the day after. OK. And so we'll be talking about all those.

We're going to be talking about:

• option strategies that I use around earnings in all these cases
• how to determine which strategy to use and when
• what are the best stocks for earnings and plays and of course which ones to avoid
• the one guarantee with earnings and how to play it
• how to trade earnings with a smaller account
• how to protect your account when trades go wrong
• money management tips for earnings trades

And I'll be doing some live trading. OK. So this will be a lot of fun and again it's going to be this Saturday east coast time from 2 to 6 east coast time in the afternoon. If you can't attend live, that's fine. It'll be recorded and you'll be able to review the recording before the market opens. And then on Tuesday we're going to do -- place actual earnings trades for the last two hours of the market. And then on Wednesday, the first couple of hours of the market we'll actually manage those and place some new directional trades. All right. This site -- this is going to go on the site at $997. If you're getting this you can still sign up for $497 at the discounted rate. All right. It should be a lot of fun. I'm really looking forward to this. Earnings provide a ton of opportunities. If you don't know what you're doing you're going to have your head handed to you. If you've gone through as many earnings quarters as I have, you start to learn how the game is played and that's what I want to share with you. All right. You guys have a great night and we'll see you at the next update.