For the last few months, investing in Tesla (Nasdaq: TSLA) has been like playing chess with a pigeon.
In other words, say you’re on one side of the chessboard – and you move your pawn up one spot.
On the other side of the board, your opponent – the pigeon – picks up their queen, jumps it eight spaces ahead, walks onto the board, pecks your king, flips the entire board over, sends the pieces everywhere and then declares they’ve won the game.
Sound like a frustrating game to play?
Well, frustrated is exactly how Tesla shareholders are feeling lately.
For starters, you have the increasingly erratic behavior of Elon Musk, who is facing a pair of lawsuits from shareholders.
The first one accuses Musk of engineering a bailout disguised as an acquisition for SolarCity.
The second one claims that a multibillion-dollar compensation package for Musk is “unjust enrichment” for him, constituting a violation of the board’s fiduciary duties.
On top of that, you have a Bloomberg report replying to complaints by the United Automobile Workers union in 2018. Administrative Law Judge Amita Baman Tracy ruled that Tesla “illegally threatened and retaliated against employees.” The judge cited a tweet by Musk in May 2018 that was in violation because it implied that employees who join a union would have to give up company-paid stock options.
Oh, and if that wasn’t enough, you have a major vehicle delivery report coming for Tesla that could decide the near-term direction of the stock.
In The War Room, Karim outlined the parameters of this report:
Tesla “has a shot” at delivering 100,000 cars in the third quarter, a new record, CEO Elon Musk told employees in a leaked email obtained by Electrek’s Fred Lambert. Last quarter, Tesla delivered more than 95,000 cars. According to the leaked email, Musk said, “We have a shot at achieving our first 100,000 vehicle delivery quarter, which is an incredibly exciting milestone for our company!” He added that net orders are “tracking to reach about 110,000” for the quarter.
With all this background noise, how can anyone possibly trade Tesla?
Well, I focused on what the sharp money was doing – essentially, what the experts were betting on.
And here’s what I learned…
Last week, a sharp paper buyer bought 1,500 Tesla October $222.50 puts for $517,500 (this buyer really wanted them, as they were bought on the ask). Looking at the chart, I said that I agreed with this put buyer, as Tesla was approaching resistance at $250.
Does this put buy give us an early indication about the company hitting – or missing – the delivery numbers? There’s no way to tell for sure. However, I tend to lean toward yes. This led to an immediate profit opportunity today in The War Room.
Action Plan: As you can see from the Tesla chart, a series of lower highs gave members the indication that the company was tracking lower. Add in the erratic news flow – combined with the sharp paper put buyer – and shorting Tesla this morning was easy. In The War Room, we added puts and sold them later in the afternoon for a quick 20% winner. For the time being, shorting any upside moves remains the tactical play.
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[adzerk-get-ad zone="245143" size="4"]About Bryan Bottarelli
Whether it was selling the Star Wars figures he collected as a little boy for 50 times their value or using the $125 he made cutting grass to buy a Michael Jordan rookie card that he later sold for $1,500, it was always clear that Bryan Bottarelli was a born trader – possessing the unique ability to identify opportunities and leverage his investments.
Graduating with a business degree from the highly rated Indiana University Kelley School of Business, Bryan got his first job out of college trading stock options on the floor of the Chicago Board Options Exchange (CBOE). There, he was mentored by one of the country’s top floor traders during the heart of the technology boom from 1999 to 2000 – trading in the crowded and lively Apple computer pit. Executing his trades in real time, Bryan learned to identify and implement some of his most powerful trading secrets… secrets that rarely find their way outside the CBOE to be used by individual traders.
Recognizing the true value of these methods, Bryan tapped into his entrepreneurial spirit and took a risk. He walked off the CBOE floor and launched his own independent trading research service called Bottarelli Research. From February 2006 to December 2018, Bryan gave his precise trading instructions to a small, elite group – most of whom have been followers ever since.
As a “play tactician,” Bryan uses his hands-on knowledge of floor trading to shape opportunities and chart formations into elegant, powerful and profitable recommendations. And by using the same hedging techniques taught by professional floor traders, Bryan is able to deliver his readers remarkable gain opportunities while strictly limiting their total risk.
Along the way, Bryan has developed a cumulative track record that could impress even the most successful hedge fund manager.
He now spends his days moderating one of the most elite trading research forums ever created: The War Room.
