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Trading Tesla after 54% share price increase — #SaxoStrats

Peter Garnry
Tesla share price are up 54% since early December. Saxo Bank’s head of equity strategy Peter Garnry explains, why he thinks this is exaggerated and how to profit from this.

Preliminary Q4 earnings are way below expectations. Investors. however, don't seem to care and the valuation of Tesla is beyond anything else in the car industry. Tesla claims now being an energy innovation company, but according to Garnry this is not in sync with the underlying data.

Tesla’s SolarCity acquisition comes with great risks and the company will likely need to tap capital markets to fuel growth, says Garnry.

There will be downside risks over the next 3-4 months and we are looking for the share to drop from its current $280 level down to $220, says Garny.

The best way to express a negative view on Tesla is through put options. We buy the put options with a strike at $280 and expiry in June 2017, Garnry concludes.

Read the whole article here.
Dear Peter, would you please clarify one question for me. The idea here would be to sell the put before its expiration and gain on the difference of commission (now 25.5 per contract which would hopefully increase). Is that correct?
Peter Garnry Peter Garnry
"The best way to express a negative view on Tesla is through put options. We buy the put options with a strike at $280 and expiry in June 2017" - buying the put option gives me a right to sell the shares at $280 on expiry. I pay for 25.50 for it. So I make money if the share price ends below 280 - 25.50 at expiry. Hope it makes sense.
Thanks Peter. I understand that. But do we wait till expiration or sell the put before? Or these are two alternatives?
C.A.L. gr C.A.L. gr
Dear Peter,
Can you explain a bit more why it is expensive to play this via sell CFDs? I can understand the risk of a possible upward price fluctuation (which can be dealt with a stop loss) but I do not see any other problem.
Philidor Philidor
CALgr if Tesla reports a positive surprise on earnings, shares will open much higher on the next day. A stop loss will not protect you, and theoretically there's no limit to the amount you can lose.


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