How We Traded Tesla’s “Investor Day”
By: Steve Smith
Tesla (TSLA) held an “Investor Day” event on March 1 in what could have been one of the key days of the year for the electric vehicle giant.
It should also be widely entertaining as I expect Elon Musk to be flying high and in top form as he recently reclaimed the title of the world’s richest man thanks to TSLA stock price surging some 70% for the year-to-date.
Yet the stock price in the pre-market is down. Blame it on Elon, or the fact that his “Master Plan 3” he revealed, skimped on the details. Either way, it’s a good day to fill in investors on what’s going on, even if it comes with some of the typical Elon antics.
Some of the topics Musk addressed included Tesla’s long term expansion plans, the next generation platform, and capital allocation.
Back in 2006 Musk published his Secret Master Plan, which he summed up with these four points:
- Build sports car
- Use that money to build an affordable car
- Use that money to build an even more affordable car
- While doing above, also provide zero emission electric power generation options. Tell no one…
Musk says they achieved part two in 2016, and, as expected, he discussed part three on Wednesday.
Part of reaching the goal of more affordable vehicles will be dependent on the development of “generation 3 platform,” which investors hope to get more details on in the future, they hope. Some are even hoping he will unveil a prototype for a new mass-market model.
The Cybertruck, a project that really has the market buzzing, was also discussed, including the chnages that were made in the latest “beta” version. Autonomous driving applications, energy storage initiatives, charging network revenue potential, and Tesla robot could all be woven into the master plan, as well.
Bulls will still be looking for more details about capital allocation with some even speculating about a potential stock buyback plan. Given the investment required to continue to scale and lower vehicle costs, the idea of a buyback seems far fetched to me, at least at this time.
Speaking of far fetched, the bears greeted the lack of details and met what plans Elon did lay out with a high degree of skepticism. They would like to remind people of the numerous times Musk has underdelivered, not just on price and unit volume, but the timetable of fully autonomous driving.
Whatever is presented at these events, it always forces other automakers’ hand. Both EV makers, Lucid (LCID) and Fisker (FSR), as well as legacy manufacturers such as Ford (F) and General Motors (GM) to sit up and take notice.
For my, and Options360’s part, we tried to take advantage of the pumped up option premium ahead of the event by selling an iron condor. The options are pricing in a 5.9% or $13 move over the next two days.
Options360 established the position over a week ago using the March 3rd expiration and strikes that are some $20 out-the-money; meaning if the stock remains within the expected range we should reap a very nice profit.
To learn more about this trade and the countless more like it my students and I put on throughout the year, you’ll have to become an Options360 member. But don’t wait too long…
Don’t miss out on being a part of our growing community… or miss the next trade. Join Options360 today!