[Options] "Gimme Something Sloppy!"

Sean McLaughlin
January 17, 2024

Look what we have here: a $VIX popping its head up to two-month highs.

Are investors getting a little spooked by the prospect of a tricky earnings season?

We'll be able to figure all that out after the fact. In the meantime, we will use these elevated options premiums to help us ride out some portfolio profitability.

I asked my analysts to find me a big cap name that is trading sloppy.

And the one they came with is a widely followed mega-cap name that has been flopping around in a sideways choppy range which, coupled with upcoming earnings, is helping to juice options premiums.

Here's everyone's favorite EV car maker Tesla $TSLA:

We've got earnings in $TSLA coming up next week, and assuming the range as shown up above is not blown out, then I feel pretty good about the options premiums getting sucked out in the days following the report.

If we put on a February Iron Condor here, it's possible we could hit our profit target by the end of next week.

That's a bet I want to make.

Here's the Play:

I like selling a $TSLA February 180/190/240/250 Iron Condor for an approximately $3.10 net credit. This means I'll be short the 190 puts and the 240 calls, while protecting the position with long 180 puts and 250 calls which defines our risk:

I'll be setting my stop loss levels at our breakevens. So 187 on the downside and 243 on the upside. Any $TSLA closing prices outside of those levels are my trigger to exit the trade and protect what's left of my capital in this trade.

Meanwhile, I'll leave a resting GTC limit order to close this spread down for a profit for a $1.50 debit. And if we get a muted earnings reaction next week, it's likely we'll get our profit target, or be close before the end of next week.

If you have any questions on this trade, please send them here.

If you missed last week’s video Jam Session, you can catch a replay on Stock Market TV.

~ @OptionsSean

P.S. We do trades like this regularly. If you'd like to leverage Best-in-Class technical analysis into smarter directional options trades, try out All Star Options Risk Free! Or give us a call to learn more: 323-421-7910.

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