Trade Breakdown: TSLA

Strategy by Charlie Bathgate

Trade Breakdown: TSLA


It’s no secret that that overall market has taken a downturn since mid-March, and the high flyer names have gone down with it.

In the beginning of the week the high-beta names did not have much selling on the tape, but we noticed that there was an absence of buying off the lows in the equity and options space. TSLA has slowly drifted downwards alongside the overall market as it dropped over 100 points in the last three weeks. The stock has stayed rangebound between the $250 and $260 since late March…these are price levels we haven’t seen since March 2017.

Then, yesterday (April 4th), the tape started to shift directions.

What was once a lifeless tech name with no buyers became a stock to watch for short-term momentum plays. Yesterday the stock opened around the $252 support level, and the SPY bounced off its $260 support level as well. TSLA ended yesterday’s trading session up 34 points off the lows, and the SPY closed up 2.6%.

Today we saw the market gap slightly higher off the open, and TSLA continued its move toward the upside. Early in the morning we saw almost $600K worth of weekly call options bought within the first hour of trading:

The stock slowly inched its way higher during the first two hours of trading with no sellers in sight. At 11:35am, over 20K shares printed on the offer at $300, and the stock continued to the upside with no hesitation around this key support level.

Many of our traders in the Steamroom noticed the switch in sentiment and took advantage of the change in price action:

Mickbob took part in TSLA’s price action by purchasing common stock on Wednesday, April 4th. The stock consolidated at the $269 price level from 10:00am to 10:20am, and during this period he purchased 80 shares. He held his position overnight, and after TSLA and the SPY gapped up today he sold his position at $295 at 10:45am. He raked in over $2,000 in profit on this short term play. Not bad for a day’s work!

Rickjaydub also caught momentum caused by the strength in the SPY, the call sweepers off the open today, and the repeat buying on the tape. He purchased the April 6th weekly 305 calls at $1.90 around 11:01am. He sold his position at $3.30 around 11:42am when TSLA began to stall around the $302 area. On this trade alone he made over 73% in profit!

Most of March and early April was bloody throughout all sectors of the market. However, by closely monitoring the tape and the unusual options activity in the Steamroom, our members anticipated the turning point in TSLA and converted it to a solid profit.