Welcome to another edition of Top Pick Tuesdays! This week, we’re setting our sights on an electrifying opportunity in the electric vehicle market with Tesla, Inc. (TSLA). As the company continues to innovate and dominate headlines, we’re zoning in on a specific options strategy that could spark significant gains for savvy investors.

Tesla’s Current Trajectory

Tesla has been a standout in the EV industry, constantly pushing the boundaries of technology and sustainability. However, even market leaders like Tesla aren’t immune to market fluctuations. This is where our strategy comes into play.

Technical Analysis and Strategy

Our analysis has identified a major support area for TSLA around $228.36. This level is crucial as it has historically acted as a springboard for the stock, indicating strong buying interest. Despite a recent period of consolidation, our confidence in Tesla under the $215 mark remains high.

We’re targeting the 215 put option for the March expiration. By selling this put, we can expect a credit of $1,560.00 per option, with less than 50% margin required for deposit. This approach not only capitalizes on Tesla’s current market position but also aligns with a more conservative risk profile.

The Cash-Secured Put Strategy

In this strategy, we’re utilizing cash-secured puts. This means we’re prepared to buy the stock at the strike price if it’s assigned, using cash set aside for this purpose. With an average fill of $7.80 per option, our assignment price would be $207.20. This price not only gives us a favorable entry point into Tesla but also keeps our investment within a manageable range.

Risk Considerations

As with any investment strategy, there are risks involved. The primary risk here is that Tesla’s stock could fall significantly below our strike price, potentially leading to losses. However, given Tesla’s strong market position and our analysis of support levels, we believe this is a calculated risk worth taking.

Conclusion

Tesla’s innovative edge and market presence make it a compelling choice for this week’s top pick. By employing a cash-secured put strategy, we’re looking to capitalize on Tesla’s potential while maintaining a level of safety. Remember, options trading isn’t for everyone and comes with its own set of risks, so ensure this strategy aligns with your investment goals and risk tolerance.

CHART (click to see image)

Disclaimer: This article is for informational and educational purposes only, not investment advice. We recommend researching and consulting with a financial advisor before making investment decisions. All actions based on this information are at your own risk.

What they do

NIO Inc (NIO:NYSE) is a China-based holding company principally engaged in the research, development and manufacturing of premium smart electric vehicles. The Company is engaged in the design, development, manufacture and sales of high-end smart electric vehicles. The Company’s products include models such as EP9 supercar, ES8, ES6, EC6 and ET7. The Company develops battery swapping and charging technologies as well as autonomous driving technologies. Its electric vehicles apply NAD (NIO Autonomous Driving) technology, including super computing platform NIO Adam and super sensing system NIO Aquila. The Company is also engaged in the provision of charging piles, vehicle internet connection services and extended lifetime warranties. The company was founded by Bin Li and Li Hong Qin on November 28, 2014 and is headquartered in Jiading, China.

Opinion

We hope your holiday season has been fruitful, but relaxing as you gear up 2024! This week, let’s shift our focus to NIO Inc (NIO:NYSE). This is a familiar name from the past few years that has risen as a Chinese-based competitor to Tesla, Inc (TSLA:NASDAQ) in the electric smart car sector. In recent years, NIO suffered setbacks post the November 2022 market dip (highlighted in the chart), hitting a 52-week low at $7 per share, presently sitting at $8.42 per share as this idea is prepared. Despite the associated geopolitical risks due to its Chinese base, NIO boasts an array of news catalysts leading up to the recent NIO day, coupled with analyst upgrades projecting an average 12-month price target (PT) of $11.36—a potential surge of approximately 35%, making it an enticing trade prospect for 2024.

Plan

Examining the visual roadmap and observing the bounce off the 52-week low for the past three weeks signals a gain in positive momentum. News catalysts, including analyst upgrades and the unveiling of an extended-range battery via the X platform, fuel the stock’s movement. Notably, the stock exhibited a significant upswing between June and August 2023, peaking at $16.18 per share—a 92% difference from current prices and 42% above the current 12-month PT. The upper bound of this target range (highlighted in green) marks a substantial resistance area and a good time to secure profits or to even exit the trade. Beyond this hurdle lies higher price targets (highlighted in yellow), extending up to $24.20—an additional bonus if the trade holds to that point. Let’s focus on the diagram highlighted target prices in green for profit-taking levels and stop adjustments to mitigate downside risks. Consider the 52-week low as a final stop to limit losses as losing that support would plunge the stock into uncharted territory.

Is this the only way to trade NIO? No, by leveraging methods such as option strategies like Covered Calls (CC) or Cash Secured Puts (CSP) discussed in previous articles, there are multiple ways to tackle this trade. Our Theta Bandits Discord community serves as a hub to access and share other traders’ ideas and strategies for NIO and various other tickers.

RISKS

As mentioned earlier, given NIO is a China-based company and has geo-political risks associated. It is essential to keep a look-out for an escalation in tensions which might affect this trade and mitigate risks by adjusting your targets and stop protections and review the plan accordingly. Conversely, any easing of tensions could potentially bolster the stock.

Disclaimer: This article is for informational and educational purposes only, not investment advice. We recommend researching and consulting with a financial advisor before making investment decisions. All actions based on this information are at your own risk.