Options Analytics, Tesla

Analyzing the news about Tesla stock(TSLA) we can see 3 main segments:

-> the one considering that the lack of sales in Europe are an important factor, implying that the stock is overpriced;

-> another one which looks just at the overwhelming requests of Tesla 3 model and anticipate a positive future and of course a higher stock price;

->the third group, the one I am, is the one which looks at the news just to know what are the news and that’s all. This group takes a deeper dive and about this will elaborate next.

I start by looking at the Implied Volatility of the stock which is pretty high at 69.6% and even more important is the IV Rank, where is the current implied volatility compared to past volatility, and is around 41%. Which is enough to adopt a volatility selling strategy.

Iron Condor is one of this type of strategies, where you sell 2 options, one put and one call closer to where the price of the stock is and buy another two further out.

You can see in the pic from above that the delta is for the short options around 22, which is equivalent with that the probability of those strike to be touched by the stock is around 22%. That implies that out short strikes of the strategy are inside 1 standard deviation but at the edges of the anticipated expected move for the next 41 days. The theta of the trade is 2.47, implying that for every day we are in the trade, if all other things stays equal, we are gonna receive 2.47$. Our probability of profit is going to be around 70% if we close for half of the potential profit considering the strategy, that means that we have 70% of making at least 100$. Considering that we risk 300 that’s a return on risk of 33%, which is very hard to achieve if you would be trading the stock!

Just saying 😉