For today’s Trade of the Day, we will be looking at Tesla, Inc. symbol (TSLA).
Tesla, Inc. designs, develops, manufactures, leases, and sells electric vehicles, and energy generation and storage systems in the United States, China, and internationally. The company was formerly known as Tesla Motors, Inc. and changed its name to Tesla, Inc. in February 2017. Tesla, Inc. was incorporated in 2003 and is headquartered in Austin, Texas.
The chart of TSLA below is a weekly chart with a CCI indicator at the bottom. The description coming up next explains how to use the CCI.
Channel Commodity Index
Stockcharts.com provides a great definition of the Commodity Channel Index (CCI), which is a versatile indicator that can be used to identify a new trend or warn of extreme conditions. Originally, it was developed to identify cyclical turns in commodities, but the indicator can be successfully applied to indices, ETFs, stocks and other securities. In general, CCI measures the current price level relative to an average price level over a given period.
CCI is relatively high when prices are far above their average but is relatively low when prices are far below their average. In this manner, CCI can be used to identify overbought and oversold levels or breaks from one level to another.
A move down to the CCI -100 or the zero line can issue a Put entry signal as it moves from being bullish to bearish. A move toward -100 is a continuation of that bearishness. Up through the 100 line creates a green fin of bullishness until it drops down through the -100 line.
A break below the zero line means it has gone from bullish to bearish and a drop below -100 suggests even more bearishness.
On the CCI indicator below the TSLA chart, notice how the line crossed up and is above the 0 which is bullish territory. This signals bullish moves with the thought that price may move up.
TSLA’s Potential Trade
Please note and remember that I am typing this on Tuesday, a day before you receive it. The information I am sharing could change and is intended to share the opportunities that options offer us.
We want CCI on TSLA to go up to create a fin shape. We also want the price to go up to at least $184 before entering a trade. The first target would be $190.
Check Out How an Option Trade Could Pay Out Big Time
To buy stock shares of TSLA today, price would be approximately $183.21. If price went to $190 you would make about $6.79 per share.
That said, option trading offers the potential of a smaller initial investment and higher percentage gain even when price is expected to rise or fall. Let’s take a look.
If you bought one Call option contract covering 100 shares of TSLA’s stock with a April 21st expiration date for the 190 strike, premium would be approximately $11.15 today, or a total of $1115 per contract. If the stock price rose the expected $6, the premium might increase approximately $3.50 to $1465 per share on your 100-share contract. This is a 31% gain over a couple weeks.
For updates on previous potential trades we have discussed, scroll to the bottom of this message.
Remember you can close an option trade anywhere along the line before expiration to take gains or stop a loss.
Options can offer a win, win, win trade opportunity. They often offer a smaller overall investment, covering more shares of stock, and potentially offer greater profits.
I love to trade, and I love to teach. It is my thing.
I wish you the very best,
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Past potential trade update:
Last week we discussed buying FCX puts. On 3-16 the April 21st 34 put was $1.04. You could have sold for $1.37 on 3-17, a 32% profit.