Tesla: Even and Idiot Like Me Can Make Money Buying Puts

by JDH on May 18, 2019

Watching the collapse of Tesla has been glorious.  Yes, I know the true believers say the car is great (and perhaps it is, particularly if you have never driven another electric car) and perhaps Elon should be given credit for forcing real car makers to make electric cars, but I still believe that anyone who continually lies to the public is not a genius; he’s a charlatan.  He has made over $10 billion of real people’s money disappear, and that should be a crime.

So, here’s how I played it.  I bought puts, $200 strike price, expiring the third Friday in June, on the following dates:

April 26: 10 contracts at $6.45

April 26: 10 contracts at $8.85

April 30: 10 contracts at $6.60

May 2: 10 contracts at $5.00

May 3: 10 contracts at $3.00

(As you can see, between April 26 and May 3 the price of Tesla went up, so the cost of the puts went down, so I kept buying more to average down).

And then I began to sell them:

May 13: 10 contracts at $5.65

I knew I would be busy this week and wouldn’t be able to keep an eye on it, so I placed sell order as follows, all of which got filled on May 17:

10 at $7.00

20 at $8.00

10 at $9.00

They closed the day at $9.61, so in hindsight I should have just put in a sell order for all 50 of them at $9.50, but that’s only possible in hindsight.  It was a nice profit, so I’m happy.

What next?

Tesla is now trading at $210, which is the same price it was trading at in February of 2014, so in over 5 years the buy and hold crowd has not made a penny.  That’s not a good return on investment.

Tesla is in an obvious down trend, but it doesn’t go down in a straight line. It will likely bounce back up over $200.  It’s likely that Fraud Boy Elon will announce that he will be releasing a moon rover or some such and the market will bounce up.  So, when that happens, I’ll buy more puts, perhaps the July expiration, perhaps around $190 strike price.

Or maybe I’m done playing this game, I don’t know.

Tune in next week and see if anything happened.