Tesla reported that it delivered 184,800 vehicles in the first quarter.
Dean Mouhtaropoulos/Getty Images
This column has been updated to reflect Tesla’s report on April 2 of first-quarter vehicle deliveries.
Tesla’s stock has risen 628% in the past year despite legions of skeptics, giving the electric-car company a market cap of about $640 billion. That makes co-founder and CEO Elon Musk the richest man in the world, or one of the richest, depending on the fluctuations in the share price on any given day.
Musk is a little less wealthy these days, however, than he was at the start of the year. Tesla stock (ticker: TSLA) is down 6.2% in 2021, and has fallen about 23% since first-quarter earnings were released on Jan. 27.
While some of the selling is likely due to profit-taking after an extraordinary run, Tesla’s announcements typically spark volatility in its shares, affording options traders an opportunity to ring up profits. Another announcement, about first-quarter deliveries, came Friday, when the stock market was closed for the Good Friday holiday.
Tesla reported that it delivered 184,800 vehicles in the first quarter, up from 181,000 deliveries in the fourth quarter of 2020. The latest results exceeded FactSet’s consensus estimate of 162,000 deliveries for the quarter just ended. Tesla’s cars are basically computers on wheels, and first-quarter sales were expected to have been negatively impacted by the global semiconductor-chip shortage. But that proved not to be the case.
While investors couldn’t react to Tesla’s news on Friday, it is reasonable to think the stock will rally Monday, given that reported deliveries were so much stronger than expected. That creates an opportunity for aggressive investors. If the shares advance, the value of Tesla’s typically pricey put options likely would decrease. (Call options give holders the right to buy an index or individual stock within a set period, while puts give holders the right to sell them.)
Traders who want to wager on Tesla’s stock price advancing might consider selling Tesla’s May $500 put or May $550 put. The puts were trading around $11 and $20, respectively, this past week, when the stock was $661.75. Tesla’s stock has ranged from $89.28 to $900.40 in the past 52 weeks.
If the stock price is above the strike price at expiration, investors can keep the put premium. But should the stock price fall below the strike price at expiration, the put seller would have to buy the stock at the put strike price, or adjust the position in the options market to avoid buying the shares.
When selling puts, it may make sense to use a cash-secured strategy, which entails depositing in a brokerage account the money needed to buy the stock at the put strike price. The strategy is similar to entering a limit order to buy a stock at a set price. But many investors prefer to use leverage and will finance put sales via their margin account, which requires much less money down.
Either way, anyone engaging in this trade must be vigilant, given Tesla’s typical volatility. Should the stock sink, the good news is that buying a powerhouse stock after a big decline usually leads to nice returns.
Moderna (MRNA), whose vaccines have helped to inoculate people against the Covid-19 virus, will host a Virtual Vaccines Day on April 14. The company is expected to brief investors on vaccines and key considerations for the future. Goldman Sachs has flagged the event as a potential opportunity for investors bullish on Moderna’s prospects and shares.
Those so inclined can consider buying Moderna’s May $135 call option, which cost about $12 when the stock was trading at $132.55. Shares have traded as high as $189.26 in the past year. The stock is up 27% this year and 299% in the past 52 weeks.
Steven M. Sears is the president and chief operating officer of Options Solutions, a specialized asset-management firm. Neither he nor the firm has a position in the options or underlying securities mentioned in this column.
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