On January 2, local time in the U.S., $Tesla Motors(TSLA)$ released its Q4 2024 global production and delivery report.
Tesla’s global vehicle deliveries for 2024 totaled 1.79 million units, down from 1.8 million units in 2023 and falling short of analysts' consensus estimate of 1.8 million. This marks Tesla’s first year-over-year decline in annual deliveries since 2015.
In response to the news, Tesla's U.S. stock market opened with a sharp drop, closing down 6.08%, wiping out $78.8 billion in market value (approximately RMB 577.05 billion). Over the past five trading days, Tesla has plunged nearly 18%.
Earlier reports noted two separate vehicle collision and explosion incidents in the U.S., one of which involved a Tesla Cybertruck.
Tesla CEO Elon Musk posted on social media confirming that a Cybertruck explosion outside the Trump Hotel in Las Vegas was caused by massive fireworks and/or a bomb, unrelated to the vehicle itself.
Historical Patterns Suggest Potential Short-Term Pullbacks After Big Rallies
Historically, Tesla has experienced phases of pullbacks following significant price surges. Investors concerned about potential short-term corrections may consider using a Collar Strategy to hedge against such risks after a strong rally.
What Is a Collar Strategy?
For protecting against downside risk in stocks, investors often turn to buying put options (Protective Put). To reduce the cost of holding stock positions, investors can sell covered call options (Covered Call). A collar strategy combines these two approaches, offering a balance between risk mitigation and cost-effectiveness.
The collar strategy involves holding stock and simultaneously:
Buying an out-of-the-money put option (as insurance).
Selling an out-of-the-money call option (to offset the cost of the put).
This effectively places a "collar" on the stock’s performance, locking potential gains within a range while limiting downside risk. A zero-cost collar occurs when the income from selling the call entirely offsets the cost of purchasing the put.
Tesla Collar Strategy Example
Assume an investor holds 100 shares of Tesla stock currently priced at $383. The investor is uncertain about short-term price movements and wants to hedge their position. A collar strategy can be used:
Sell one call option with a strike price of $440, expiring on January 31, for $10.66 per share, generating $1,066 in premium income.
Buy one put option with a strike price of $330, also expiring on January 31, for $9.35 per share, costing $935.
The net premium income is $131 ($1,066 - $935), making this a low-cost protective strategy.
Downside Protection: If Tesla’s stock price falls below $330, losses will be capped regardless of how much further the stock declines.
Upside Potential: If the stock rises to $440, the position achieves its maximum profit.
Benefits of the Collar Strategy
As shown in the example, the collar strategy allows Tesla investors to protect their gains while mitigating risks. Once short-term volatility subsides, investors can unwind the collar and pivot toward bullish or bearish trades based on new developments, such as earnings reports.
Comments