The following articles are related to ‘TSLA’ at Psychological Investor.
Tesla’s earnings report last night has now pushed the common stock over $150, netting a 30% gain in just 47 days for investors who recently wrote September puts at the 90 strike.
The Tesla derivatives strategy which I described in May is now coming to a successful close. With the broad market selloff that is now underway providing a backdrop of higher volatility, the possibility of establishing a similar position in the August expiry at a higher strike is worth considering.
Selling puts with the aim of capitalizing on inflated implied volatility prior to an earnings release counts as an investment strategy only for those who would be willing to own the underlying stock outright.
Without a crystal ball, there’s no way to tell whether the post-earnings spike in Tesla Motors will hold through June options expiry, but for investors who wrote naked puts before earnings, the combination of a price surge and the fall in implied volatility makes for a profitable exit.
When investor worry in the run-up to a quarterly earnings announcement pushes implied volatility well above historical levels, naked put writing provides an opportunity to profit from the inevitable fall in implied volatility after results are in.
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