Tesla Motors (Nasdaq: TSLA, 238.36) shares have accelerated nicely in 2014, up over 58% year to date. The stock has traded in a 52-week range of $116.10 – $291.42, with shares reaching their all-time high on August 31.
Tesla is scheduled to report earnings after the close of Wednesday’s session. Consensus analyst estimates are forecasting negative EPS of $0.01 on $889.28 million in revenue. Tesla has beat EPS for four consecutive quarters.
Historically, TSLA shares have moved an average of 11.9% over the past 8 quarters earnings reports, with the stock rallying on two of the past four quarters and five of the past eight. The TSLA Nov Weekly 237.5 Straddle is 20.75-21.25, implying a slightly muted move of 8.9%.
Since my outlook is bullish, I will look for a call spread with the most favorable risk-reward set-up. The trade below meets my criteria, but in order to best capture the earnings catalyst, it’s best to wait to as close to the announcement as possible to put on a position (in this case, shortly before the close of Wednesday’s session).
My Trade: Buy the TSLA Nov Weekly 245-255 Call Spread for $3.25
- Risk: $325 per 1 Lot
- Reward: Up to $675 per 1 lot
- Break-even (at expiration): $248.25
Greeks of this trade:
