Buying A Call Option On Tesla (TSLA)

| January 7, 2015 | 0 Comments

Buying A Call Option On Tesla Motors (TSLA)

As we kick off 2015, I’m going to start by talking about one of the most successful and popular stocks of 2014. Of course, I’m talking about Tesla Motors (TSLA).

If you aren’t familiar with TSLA, well, you’re probably living under a rock. By now, most of the developed world knows about Elon Musk’s electric car giant. Tesla has rewritten the rules of the automobile industry, and produced a darned nice car to boot.

In fact, TSLA had a great 2014, up 48% for the year! The shares are currently trading at $208.03. That’s 52% off the 52-week lows, but still 29% from the 52-week highs.

So is now the time to buy a call option on Tesla?

Keep in mind, a call option makes money when the underlying stock goes up. But TSLA calls can be expensive. So is it worth it?

Well, let’s review why TSLA is such a popular stock to begin with…

First off, as I mentioned earlier, the company makes excellent cars. The Model S is one of the highest rated vehicles ever, according to Consumer Reports. Tesla buyers rave about their cars. And, a brand new model is coming out soon, the Model X (all-electric SUV).

Next, TSLA satisfies the desire of those who want to be off gasoline. Yes, gasoline is once again cheap. However, low prices won’t last forever. And, oil-based fuel is still bad for the environment.

Not to mention, TSLA stock dropped sharply with oil’s decline. But as I wrote here, it may provide a good buying opportunity for TSLA stock. After all, people who spend $60,000 to $80,000 on a car (the price of the Model S) don’t typically care too much about the price of gas.

Here’s the chart of TSLA where you can see the negative impact from November to mid-December from the plunge in crude oil prices…

call option buying opportunity, a chart of TSLA

As you can see, the shares are still trading well below the 50-day moving average and are well off the 52-week highs.

And that’s not all…

Elon Musk and Tesla continue to innovate and make groundbreaking changes. It’s the innovation of TSLA which gives the stock its nearly unlimited upside potential.

Not only is TSLA building the best cars on the market, the company is also revolutionizing energy storage. As you may know, the company is building a gigantic battery factory in Nevada. This factory is going to produce efficient, affordable batteries to store electricity.

The new batteries will allow TSLA to offer a cheaper electric car. Perhaps more importantly, they’ll be able to provide backup storage to the electric grid. That could change the way we use electricity moving forward. And, it could make renewable forms of energy more practical.

As such, this month could be a good time to invest in a TSLA call option.

Now, TSLA call options tend to be expensive, but you still want to buy some time. February 20th expiration gives you about 45 days for the stock to move higher (in your favor).

With the 210 calls in February costing $13 a piece, you may want to look at the 225 calls instead. They’re about half the cost at around $7, and aren’t too far out of the money.

Yours in Profit,

Gordon Lewis
Options Trading Research

BIO:  Gordon Lewis has been trading options for more than 15 years and he now writes and edits for You can sign up for the newsletter and get a free research report. We are your go-to source for top notch options trading research.


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Category: Options Trading

About the Author ()

Gordon Lewis is the Chief Investment Strategist and editor for the popular daily newsletter – Options Trading Research. He’s also one of the key analysts behind the highly successful Options Trading Wire and Advanced Options Adviser. As a market maker on the floor of the CBOE, Gordon analyzed and traded stocks and options across a broad range of market caps and industries including retail, internet, oil, insurance, and telecom. He often traded thousands of options contracts per month… and it’s fair to say, Gordon’s analyzed and invested in some of the most complex and successful options strategies in the world.

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