How To Make $1,325 In Options With Moderate Tesla Stock Gain

Tesla (TSLA) is showing improving relative strength and is holding above a rising 50-day moving average. 


The stock could be setting up for another run at 780, although it fell Monday amid a broad stock market sell-off.

Tesla stock is highly rated, with a Composite Rating of 96, an EPS Rating of 72, and a Relative Strength Rating of 85. The relative strength line has been improving since mid-August. 

Traders that think TSLA stock might head higher in the next few weeks could look at a bullish calendar spread. 

A calendar spread is a trade that involves selling a short-term option and buying a longer-term option with the same strike price. 

Traders with a price target of 780 could place the bullish calendar spread at that price. 

Selling the Oct. 8 expiring call option with a 780 strike price will generate around $1,600 in premium, and buying the Oct. 22 expiration 780-strike call will cost around $2,615. 

That results in a net cost for the trade of $1,015 per spread, which is the most the trade can lose. 

Estimated Profit Of $1,325 On Option Strategy

The estimated maximum profit is around $1,325, but that can vary depending on changes in implied volatility.

The idea with the trade is that if TSLA stock trades up to around 780, the calendar spread will increase, resulting in a net profit. 

A bullish calendar spread is a good way to gain some upside exposure on a stock without risking too much if the move doesn’t eventuate. 

The ideal scenario is a rise up to 780 around September with little change (or a rise) in implied volatility. 

For a trade such as this, I would set a profit target of 30% and a stop loss of 20%. 

Tesla is one of the top holdings in Cathie Woods’ ARK Invest Funds, with a whopping 10% weighting in the ARK Innovation ETF (ARKK) portfolio. 

Please remember that options are risky, and investors can lose 100% of their investment.

This article is for education purposes only and not a trade recommendation. Remember to always do your own due diligence and consult your financial advisor before making any investment decisions. 


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