On Options Action a week and a half ago (Oct 25th) Dan highlighted a way to play TSLA’s recent consolidation with a bullish calendar call spread that set-up for earnings week. Here’s the video:
Here was the trade from Oct 25th (Name That Trade TSLA – Alternating Currents) :
TRADE – Buy the Nov1st/Nov8th 180 Call Calendar for $7
- Sell 1 Nov1 180 call at 2.00
- Buy 1 Nov8 call for 9.00
The Nov1 180 call expired last week With the stock below 180, now this structure is worth the value of the Nov 8th 180 call, with the stock around $176.50 the call is worth about $9.
With earnings tonight, staying naked long this week’s 180 calls is very risky, considering the fact they could basically be worthless if the stock were to be lower tomorrow morning. With that in mind the best strategy is to either sell this call for a profit today on any intra-day strength, or to spread the call (selling a higher strike call of the same expiration, thus reducing your break-even while also reducing your risk, BUT capping your upside) if the plan is to be long delta into the event. As far as spreads, selling the Nov 8th 195 or 200 call makes sense considering the previous highs could act as resistance on an earnings pop.