To The Moon

The unveiling of the Cybercab and Robovan at “Robotaxi Day” was supposed to be a game changer. Yet, crucial details were missing. Elon Musk's claims about self-driving taxis and humanoid robots left Wall Street disappointed.

Market Reaction

Overnight, $Tesla Motors(TSLA)$ shares plummeted, initially dropping over 10%. They closed down 8.78%, settling at $217.80.

During the event, Musk revealed that the Cybercab might not hit the market until "before 2027," targeting taxi companies. He also projected that Tesla cars would achieve full autonomy in Texas and California next year, with the Optimus robot expected to be priced between $20,000 and $30,000. The Cybercab is set to be priced under $30,000.

However, Morgan Stanley analyst Adam Jonas expressed his frustration. He expected more substantial updates on Tesla’s fully autonomous driving system (FSD) and the economic implications of their ride-sharing strategy. Jonas wanted insights on Tesla’s collaboration with xAI and a detailed vision for the company’s future, but none of that surfaced.

He remarked that while Optimus performed basic tasks like pouring a beer and dancing, it still required human supervision and remote control rather than operating autonomously. This suggests that the robots aren't truly independent yet, showcasing more freedom and flexibility than true autonomy.

Ultimately, the event failed to deliver anything groundbreaking, lacking the new details that investors were hoping for. As Tesla's stock seems poised to hit a bottom, bull call spread strategy could come into play.

Bull Call Spread Strategy

A bull call spread involves selling a call option while simultaneously buying another call option with the same expiration date but a lower strike price for the same asset. Since the premium from selling a call is typically higher than that of buying one, investors generally receive a net credit.

For those expecting a price increase but wary of significant market declines, this strategy could be a viable option right now.

1.Tesla Case Study

Taking Tesla as an example, on October 14th, before the US market opened, Tesla's trading price was $217.80. An options trader anticipates that the stock might hit $250 within a month but is also wary of potential downside risks.

To manage this, the trader sells a put option with a $250 strike price, expiring on November 15th, and receives a premium of $3,700. Simultaneously, they buy a put option with a $215 strike price, also expiring on November 15th, for a premium of $1,382.This is a bull spread strategy for put options by selling put options with a lower strike price and buying put options with a higher strike price to profit when the underlying price rises. The following is a detailed profit and loss analysis:

2.Profit and Loss

The investor sold the put option with a target price of $250 and bought the put option with a target price of $215, receiving a $3,700 premium and paying $1,382. The due date is also November 15.

• Net Income: The investor receives a $3,700 premium and pays $1,382, resulting in a net income of $3,700-1,382 = $2,318.

• Maximum profit: If the underlying price is above $250, both options expire and the investor retains the net premium income, which is the maximum profit of $2,318.

• Maximum loss: If the price of the underlying stock falls to or below $215, the $250 strike put option sold will be exercised, and the $215 put option purchased will also be exercised, the amount of loss is the spread between the two options. The spread of the options contract is $35 ($250 - $215), which corresponds to a maximum loss of $35 x 100 shares = $3,500.

Because the investor has already received a net royalty of $2318, the maximum loss is $3500 - $2318 = $1182.

Summary

This bullish put spread strategy effectively allows the trader to capitalize on expected price movements in Tesla while limiting downside risk to $1,182. It’s a calculated approach to navigating the market's volatility.