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A no-cost options strategy to get long Tesla

Started by Michael Gonsalves, Jan 27, 2024, 04:23 PM

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Michael Gonsalves

According to the article A no-cost options strategy to get long Tesla if this sell-off is just an emotional overreaction in CNBC, traders who want to benefit from the correction in Tesla shares can deploy an options strategy if they feel that the correction is overdone. The technicals are also showing an oversold condition.

The recommended options trade strategy is a credit spread, better known as a risk reversal. This credit spread can be established by selling an at-the-money put and using the premium collected in writing that put option to buy an upside out-of-the-money call. The same expiration will be used for both the put and the call options. Tesla Risk Reversal: Sold the regular expiration March $185 put for $11.00 (collected) Bought the regular expiration March $200 call for $6.50 The result in the sale of the ATM $185 put and the purchase of the upside $200 call results in a credit spread collecting $4.50 or $450 every one lot.