Tesla's Bounce and Base Business
Tesla (TSLA) recovered this week after looking oversold over the prior two months. The stock traded near $389, down about 8% below its November setup and still down 13% year to date; it remains in bear market territory from the all-time highs reached last December, up about 8% this week.
Third quarter revenue and earnings came in fine, flat versus the prior year. Revenue is stabilizing around $28 billion. The company stays solidly profitable and free cash flow positive - something no other US EV maker can claim, including pure plays Rivian (RIVN) and Lucid (LCID). The base business looks stable, and the outlook is stable.
Elon Musk said it would be an honor to hire Nvidia (NVDA) CEO Jensen Huang, in a response on X. There is speculation that Tesla (TSLA) could be acquired by SpaceX (SPCX); Musk hinted on the earnings call that he would back such a move but gave little detail.
Policy and Strategy Shift
After the midterms, the new Congress is not expected to restore the federal EV tax credit. A number of state-level EV tax credits still benefit Tesla (TSLA) and others.
Tesla ended Cybertruck production. That move shows the market for a pickup priced above $90,000 is limited; no maker has broken through in the EV pickup segment regardless of styling. Focus is shifting to the Cybercab, a two-seat autonomous taxi now running in Texas, with roughly 100 to 150 units on the road. Tesla and Musk are strongly committed to the Cybercab and are directly challenging Waymo in the autonomous taxi segment. More news is expected in the next few months.
Example Options Trade
One way to take a directional view on this high-priced stock uses a short neutral-to-bearish call vertical. Using November 20th monthly options, 8 days to expiration, sell the 405 call and buy the 410 or 415 call - a short $10-wide spread. The trade collects about a $230 credit per spread, which is the maximum profit. Break even sits at $407.30, about 4.5% above the current share price.
The probability the short 405 strike expires out of the money over the next 8 days is about 72%. Risk is about $770 per spread, higher than the potential gain, but the 4.5% cushion to the upside puts the odds in the trader's favor. The setup wins on consolidation or a pullback, letting the trader keep the $2.30 credit.
For a more bullish view on Tesla (TSLA), an alternative is to sell an out-of-the-money put vertical in the same short-term option series. The call vertical fits a passively neutral-to-bearish stance looking for stabilization or a small drop.
