Tesla Motors – Ticker TSLA
I would like to start by saying. I could care less for Tesla Motors.When I heard of the IPO, I thought to myself, this is just another company taking advantage of the “green” excitement going on because of the BP oil spill. Every venture capitalist I speak with, all they can talk about is clean-tech, green energy, renewable energy.
What excites me, are the options!
Whenever there is a IPO, the options do not get listed for a few weeks due to the volatility that comes with every IPO. No market maker is interested in listing options on a stock that can go up 100% and then drops 50% in a matter of two weeks.
When the new options are finally listed, they have a very short time frame to reference for the historical volatility. A typical stock has years of data so the historical volatility is very accurate and the implied volatility is adjusted accordingly.
Implied volatility for TSLA right now is 155 for the July contracts with one week until expiration and 120 on the August contracts!
This gives us some great opportunities for a covered call trade.
Currently I have an order to buy the stock and sell the $15 July Calls for a net price of $13.65. This gives me the potential to make 10% in one week. We will see if I actually get filled on my order. The spread at the time of writing is $13.93 – $14.47.
As much as I don’t like the stock, I feel that the market markers and underwriters of the IPO have it in their best interest to keep the price of the stock no more than 10% below the IPO price.
I will be watching this stock for the next three weeks to see if there are any covered call opportunities on the August options.
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Here is the chart of the 15 July Covered Call Bid Ask Spread from Interactive Brokers Workstation, It is not the easiest to read but it gives the general idea. If you look at the solid white areas, that is the spread.
This one got away from me. I could not get the order filled and now that it is back to $19 a share I am not interested.
This trade idea had to do with market psychology. Meaning, I assume the market will keep a stock higher than the IPO price for the short term after going public.
Tesla Motors, Incorporated was incorporated in the state of Delaware on July 1, 2003. The Company designs, develops, manufactures and sells high-performance fully electric vehicles and advanced electric vehicle powertrain components. It is the only Company to commercially produce a federally-compliant highway-capable electric vehicle, the Tesla Roadster, which combines a market-leading range on a single charge with attractive design, driving performance and zero tailpipe emissions. The Company believes its core intellectual property contained within its electric powertrain would form the foundation for its planned future electric vehicles. The Tesla Roadster, its first vehicle, showcases technology and illustrates its leadership in electric vehicle innovation. As of March 31, 2010 it had sold approximately 1,063 Tesla Roadsters to customers in 22 countries. At the same time it introduced the Roadster Sport, which accelerates from zero to 60 miles per hour in 3.7 seconds. The Company delivered its first right-hand drive model of the Tesla Roadster in January 2010, which it believe further demonstrates its ability to rapidly launch new products. Using a 240 volt, 40 amp outlet that is available in many homes in the United States for electric appliances, charging the Tesla Roadster battery pack to full capacity would take approximately 7 hours, which could be reduced to 4.5 hours with a professionally installed 70 amp circuit. The Company plans to continue to develop its electric powertrain technology and introduce additional electric vehicles, such as its planned Model S sedan. It is designing the Model S to be a four door, five passenger premium sedan that offers exceptional performance, functionality and attractive styling with zero tailpipe emissions at a compelling cost of ownership. It is designing the Model S to include a third row with two rear-facing child seats, subject to applicable safety regulations and requirements, allowing us to offer a seven passenger sedan. It has also developed a purpose-built electric powertrain to deliver the performance objectives of the Tesla Roadster and our planned future vehicles. It plans to be a global manufacturer and direct seller of electric vehicles and electric vehicle technologies. It competes in the premium sport vehicle market against selected premium roadsters and coupes.