How I Plan to Profit from Tesla (TSLA) by Selling Put Options
I have been keeping an eye on $Tesla Motors(TSLA)$ Tesla's stock (TSLA) for some time now, looking to add more TSLA into my retirement portfolio. TSLA has been on a decline since the end of February. Today TSLA is at a Tom Demark TD9 count of 9 with a perfect buy forming. The upwards green arrow at chart below indicates the perfect buy. This indicates a possible bullish reversal after the stock has been declining for some time. Additionally, the just-released CPI is in line with expectations and the market has surged (Pulling TSLA along) with some optimism that the upcoming rate hike to be smaller. Given these conditions, I have decided to sell put options on TSLA.
Why I Choose to Sell Put Options on TSLA
At the moment, the current price of TSLA is around the USD180 region. While I am interested in investing in TSLA, I feel that the price is too high for my appetite to buy the stocks directly. Therefore, selling put options seems like a more attractive alternative.
What is Put Option Selling?
Before I dive into the specifics of how I plan to sell put options on TSLA, it's important to understand what put option selling is. Selling a put option is a contract between a buyer and a seller that gives the buyer the right to sell the underlying asset (in this case, TSLA stock) at a specific price (strike price) before a specific date (expiration date). As the seller, I receive a premium (a fee) for taking on this obligation.
Selling Put Options on TSLA - My Plan
Based on the day chart (see first chart in the post), the next support region for TSLA should be around 123 and 109. With this in mind, I plan to sell put options at a strike price of 125 $TSLA%2020230428%20125.0%20PUT$ $TSLA 20230428 125.0 PUT$ and 115 $TSLA%2020230428%20115.0%20PUT$ $TSLA 20230428 115.0 PUT$ expiring on 28 April 2023. Currently, these options are priced at around USD 1.5 and USD 1, respectively. I anticipate i can collect around USD 150 and USD 100 of premium from each of these contracts.
Today, I will be looking to sell these options at a better price when the market retreats a bit from the current surge. Although I expect the price of these options to decrease with the rising of TSLA share price, it is okay as I expect them to expire worthless.
Risk Management Considerations
Of course, as with any investment strategy, there are risks to consider. If TSLA crashes back to near $100, the buyer may exercise the option. However, I would not mind if the buyer exercises the option as I want to own more TSLA in my long-term portfolio anyway. It's important to note that if this really happens, I have to prepare US$24,000 in my account period to buy this near to the expiry next month.
What is the TD9 Indicator and Perfect Buy?
The TD9 Indicator is a technical analysis tool used to identify potential trend reversals in financial markets, including stocks like Tesla (TSLA). The TD9 count is derived from a series of sequential candlestick price movements over nine trading days. When a TD9 count of 9 occurs, it indicates a possible reversal in the current trend. The Perfect Buy is a specific pattern that forms when a TD9 count of 9 coincides with other bullish signals, such as a moving average crossover or a bullish divergence in momentum indicators. The Perfect Buy pattern suggests a strong likelihood of an upward price move in the near term. While technical analysis indicators like the TD9 can be helpful in identifying potential trading opportunities, it's important to keep in mind that they are not foolproof and should be used in conjunction with other fundamental and technical analysis tools.
Conclusion
By selling put options on TSLA, I can potentially earn a profit without having to buy the stock directly. Although there are risks to consider, I feel confident in my plan and look forward to seeing how it plays out. Last but not least, I wished Tesla can go to the MOON!
TESLA to the MOON!
@TigerStars @MillionaireTiger @CaptainTiger @Daily_Discussion
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