A low-cost way to bet on the Tesla comeback using options

Published Fri, Jul 5 202410:32 AM EDT

Tesla's rubber is meeting the road as the high beta stock has recouped all of its 2024 losses after a 40% surge in the last month and a near 70% pop off its April 2024 lows. The year-to-date laggard of the Magnificent Seven has now vaulted into positive territory after many quarters of meandering while investors grapple with Tesla's identity as either a car company or as an artificial intelligence (AI) play. I believe Tesla (TSLA) remains one of the purest AI plays available to investors and has even more room to go higher as shorts cover their positions and investor enthusiasm reignites. Various headwinds have applied downside pressure to the stock in 2024: intense competition in China, weakening EV adoption globally, layers of price cuts, various layoffs, and continued media scrutiny of Elon Musk. The recent surge in TSLA's stock price has changed sentiment as Tesla seemingly has regained its mojo. Another key milestone event lays ahead at the August robotaxi event. TSLA YTD mountain Tesla, YTD Although year-over-year growth was negative, in Q2 Tesla delivered nearly 444k vehicles, representing a 14.8% increase versus the first quarter. The stock has not looked back since, with the hope that global EV demand may be resurfacing. The trade I have recently presented several bullish options trades on Tesla and with momentum building, I want to persist with that bullish theme. However, I do have concerns that the robotaxi event could disappoint and I suggest traders to manage any and all Tesla risk prior to that event. Since I believe Tesla will continue to explore its new higher range for the year, I want to own another upside call spread. Buying this call spread is not cheap but by selling that upside call, I defer some of the cost of owning the lower strike price. Also, I chose an end of July expiration date for this spread which is about a week before the much anticipated robotaxi event. Bought the $245 Call 7/26/2024 expiry for $16.50 Sold the $265 Call 7/26/2024 expiry for $$9.75 This bullish call spread cost $6.75 or $675 per one spread I established this trade when TSLA was roughly trading $244 Tesla has been historically volatile around key milestones, this call spread may fluctuate as prices may be volatile in the month of July. DISCLOSURES: (Long Tesla and this call spread) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL'S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.