Skip NavigationMarketsBusinessInvestingTechPolitics & PolicyVideoWatchlistInvesting Club
PRO
LivestreamMenu
watch nowVIDEO04:47This automaker’s push toward self-driving cars could provide an opportunity for options tradersOptions Action
Living in Northern California, I’ve seen the new Tesla Cybercabs driving around, particularly when I’ve been in Palo Alto (Tesla’s NorCal HQ).
The futuristic cars apparently have no steering wheel and no pedals – something I didn’t personally notice as I watched them driving around — but by now we’re starting to get used to the idea of driverless cars between the Waymos and, before they ended the program, self-driving Chevy Bolt EV’s operated by Cruise. The others, with visible sensors and cameras hanging off every corner of the vehicles, look like prototypes. The sleek Cybercab, by contrast, looks like the future is now. It’s a gamechanger.
In the short term, the market is a voting machine, and most options trades are, by their nature, short-term votes. Today’s vote is about whether a visible, wheel-less rollout can reprice Tesla from “EV maker with a software story” back toward a company that’s changing the world. Shares closed near $376 after a 5.4% jump on launch day, well below the 52-week high near $499. So how to play it using options?
The trade:
- Buy TSLA Dec 390 calls at $32.50
- Sell the Oct 23 weekly 425 calls at $9.50, and the Oct 23 weekly 330 puts at $7.30
- Net debit: $15.70.
Over the past year, the three strongest-performing technical indicators for Tesla, in order, have been MACD, DMI, and RSI. All three are bullish now, which favors buying a long call, such as the 50 delta (which traders might write “50^”) December 390s. The issue is that those cost $32.40/contract, roughly 8.6% of the current stock price.
To be profitable at expiration, the stock needs to rise above the $390 call strike by at least the premium paid. To offset this decay (aka “theta”), I’m electing to sell the nearer-dated 425/330 strangle, which collects $16.80. Theta works for the trade first: the Oct 23 strangle should decay faster than the longer-dated 390 call.
If Tesla chops between roughly 330 and 425 into that Friday, the short options expire and the remaining December call is carried at a lower basis. Depending on the stock price at that time, I may roll my short options up (or down) in price and further out in time.
Of course, the stock’s price path still matters. A move higher toward 390–410 is the base case: shorts expire, the long call retains time value, and you can reset or roll the position. A sharp spike through 425 before Oct 23 is a great outcome, but it would force a decision on the short call—buy it back, roll up and out, or let assignment convert the trade. In any case, this will be profitable to the upside because we own the December calls. A break under 330, by contrast, puts the short put in play; that is not ideal, but it is the defined risk of financing with a put. Selling a put incurs the risk of buying the stock at the put strike, but at least that represents a discount to the prevailing stock price.
Don’t forget that in that instance one would still own the longer-dated December calls, adding an upside kicker to the long position if the stock rebounds, assuming one decided to continue to hold them. Selling puts will tie up a lot of cash in your account.
The launch is limited and with a small unsupervised fleet. Waymo already has scale and trip volume Tesla has not yet matched. Cybercab is a two-seater with no cargo, and unit economics improve only if utilization and regulatory permission both expand fast, but I challenge anyone to name a company that has proven it can deliver superb EVs at scale better than Tesla.
Zoom In IconArrows pointing outwardsOptionsPlayChoose CNBC as your preferred source on Google and never miss a moment from the most trusted name in business news.Read More
