Tesla in a Race to Zero?
Make no mistake Tesla’s are FAST, I own a Model Y Performance and the acceleration is strong enough to put a massive smile on your face. The saying is true, Tesla’s win the “smiles per mile” metric.
However, this week, the electric vehicle company faced disappointing earnings and issued a concerning warning about its 2024 sales prospects.
Tesla has been in direct competition with other global electric vehicle (EV) companies, such as China’s BYD and Detroit-based automakers GM and Ford.
Despite implementing price reductions to stay competitive, Tesla lost its position as the world’s largest EV maker by sales to BYD. In 2023, Tesla reported a delivery growth of 38%, falling short of its target of 50%.
The company anticipates that vehicle volume growth in the current year may be notably lower than the previous year. In the fourth quarter, Tesla’s adjusted earnings per share (EPS) were 71 cents, slightly below analysts’ expectations of 74 cents per share. Revenue also fell short, totaling $25.17 billion compared to Wall Street’s projected $25.6 billion.
While Tesla’s total revenue increased by 3% year-over-year, its operating margin contracted from 16% to 8.2%. A one-time tax benefit of nearly $6 billion boosted Tesla’s net income from $3.7 billion in the same quarter the previous year to $7.9 billion.
For the full year, the company’s revenue from automotive sales grew by 15% to $82.42 billion. Tesla’s energy business experienced a substantial 54% year-over-year revenue increase, reaching $6.04 billion. The “Services and Other” division also saw a 37% year-over-year revenue growth, amounting to $8.32 billion.
Following the release of the earnings report, Tesla’s stock faced a decline. Despite strong gains last year, the EV maker’s stock has lost more than $16 year to date.
CFU TRADING STRATEGY FOR THE WEEK:
Covered Strangle
Not going to lie, this is one of our favorite trades to implement for income when you have some shares in an existing position and want to add more shares at a discount. The beauty of this trade is the 1-2-3 punch it allows.
Choose the Underlying Stock:
Select a stock that you believe will trade with a neutral to bullish trend over the near future.
Determine Strike Prices:
Choose strike prices for the call and put options that are out-of-the-money (OTM) but still worth your risk.
The call strike should be above the current stock price, and the put strike should be below the current stock price. We like to trade delta .25 to .30.
Sell Call Option:
Sell a call option at the chosen strike price.
Sell Put Option:
Sell a put option at the chosen strike price.
Shares of the underlying stock:
Simultaneously, buy shares (or own) the underlying stock for each short call option contract to cover the risk on the call side at 100 shares per 1 contract.
Hold Cash:
Hold enough cash to cover the obligation you may receive if the put option gets assigned to you.
Receive Premiums:
You’ll receive premiums from selling both the call and put options, providing an initial income for the trade – depending on the strikes, expiration and the underlying stock you chose, these combined premiums can be substantial.
Close or Roll Positions:
Close the position if the stock price approaches one of the strike prices and the risk becomes too high.
Alternatively, you can roll the options by buying back the current options and selling new ones with later expiration dates.
Profit and Loss:
Profits come from the premiums received from selling the options, and losses can occur if the stock price moves significantly beyond the chosen strike prices.
Here is the profit profile for a covered short strangle on AMD:
I drew this with the trade compared against the profit profile of a covered call.
POINT 1) the thin gray line shows the profit profile of a covered call
POINT 2) the green/red line shows the profit profile of a covered short strangle.
See how we’ve moved the line by selling the accompanying put. This is the power (and also the risk) of this trade.
ORDER:
Trade Order, assuming you don’t own the shares to begin with:
BUY AMD 100 SHARES
STO AMD 022624 180 CALL
STO AMD 022624 160 PUT
You will receive 1,095 in premiums up front with the possibility of earning 2,276 in total profit.
Not financial advice, or suggested trade, this is just for illustrative purposes
CFU traders play all sides of the market: bullish, bearish, and neutral. We make money in all situations and our trading systems assist us in knowing which direction holds the most likely outcome for profit and then we trade it using the most efficient strategy. 1-2 punch and it delivers results.
CFU RESULTS FROM LAST WEEK:
These are profits we locked up from the week ending January 26:
- AAPL 344%
- AMD 100%
- AMD 61%
- AMZN 11%
- BA 67%
- COIN 100%
- COIN 42% (in 30 mins)
- COIN 60%
- COIN 83%
- DLR 32%
- ELF 93%
- GD 56%
- HD 96%
- MMM 95%
- NFLX 40%
- NFLX 99% (in 1 day)
- NFLX 170%
- NOW 92%
- NVDA (COMMON) 32%
- ORCL 54%
- PGR 25%
- RTX 28%
- TSLA 96%
- TSLA 99%
- TTWO 87%
MEMBER RESULTS:
Member’s booking profit and learning to trust our system:
CLOSED AND REALIZED PROFITS 💰
Our community is fiercely focused on booking monthly profits.
We are currently not accepting new enrollments, but be sure to keep an eye on joincfu.com for alerts when we open tour next round.
Stephen
President, CFU
