Here it is. This is a somewhat unusual situation. What are we looking at? We are looking at Tesla's one day trading action yesterday which was a day when the markets had a big decline. We are also looking at the "bid and ask" on Tesla in the premarkets this morning which is a Friday.
Yesterday's big decline is causing a scare. Will the stock keep falling? One thing we do know is that the stock is going to go up or down. How do you play it? Can you play it and why would you even want to try?
A bid now of $383.60 and an ask of $383.70. These numbers are premarket pricings far below the previous closing numbers. Really far below. If you look at the above chart you can see the price range that it closed in.Yes you can buy in the premarkets with the click of a button. I should be doing blogs about how it all works but really it's as simple as it sounds. It's unusual the spread it so tight making it in theory a good time to get a good fill on an "at market" buy ticket. I would be more inclined to purchase a $390.00 series of Puts and bail out of them quickly after opening. It's 7:57 a.m. as I write this. In the past I have witnessed these exaggerated premarket declines shrivel up to near nothing as the opening bell approaches. Is that going to happen this time? Tesla now at 8:36 a.m. in the premarkets. Notice only a small price change upwards? That's strange however we are still almost an hour away from the markets opening.
Now it's 9:20 a.m. and things have not changed. That is a strong indication that things are not going to get better. Telsa's price remains stubbornly down. Other stocks are also set to open lower after yesterdays massive decline. Even getting into the Puts now "at-market" would be something to consider. This is a real crunch time.
Now the premarket at 9:29 a.m. The markets will be opening in less than one minute. Not much of an improvment. No jump upwards is in sight.
Now this below. The 390 one day Puts on the opening. Tesla opened lower and one series of Puts we show below went up over 300% in value in the first two minutes of trading. If you did own any of these Puts from a fill in the premarkets just do an "at-market-sell ticket" order. Yes you may not even have conformation of your first fill yet but if you went in at "Market" you know it will be there shortly. It's Tesla and the downward party ended pretty quickly.
Really? Watch what happened next. The stock dropped over $15.00 on the first three minutes of trading after dropping over $20.00 on the previous day! Now we are witnessing a slight rebound.
Now we must move forward and consider what might happen to it's Calls. Yes we are switching gears to look for a rebound. This time we are looking at 392.50 Calls which are slightly more responsive in nature than the 390 Calls to an upward bias. The stock is now starting to rebound and as you can see and some lucky traders just got in looking for a rebound at $2.17 and could now be getting out at $4.11.
At 9:51 a.m. they continue to go up.
I would say get out here and don't worry if you ended up selling yourself short in the process. **** Trading a rebound in the first half hour of trading is where the real action is. You just have to go into the exercise with a clear head. I will come back to this blog at the end of the trading session with some end of day reflections. As stated recently, few readers like reading blogs on trading last day to expiring Tesla options. It does make for an exhausting read. Now an end of the day recap showing how the stock traded on the day.
The big drop in the first few minutes of trading is barely noticable on the first chart. It quickly reversed itself. Here is a better chart showing this time how the 392.50 series of Calls traded on the day. Look at it's high and low.
A low of $2.17 and a high of $19.60. Getting out at the $5.55 price level as I suggested in the morning was not the right call. Late to the party option traders could have bought Call options anytime in the first hour of trading and done well. Now for a few closing observations.
1) Tesla options are like rattle snakes in a box. If you don't know how to handle them then just stay away.
2) Tesla and failing to rebound in the opening premarkets. That's what happened this morning. How big a deal is that? It is when the premarket prices are down like $20.00 and stay that way up until 9.29 a.m. after also dropping by $20.00 or so on the previous day. The importance of this observation as it relates how it's going to open for trading is not etched in stone. I am only sharing an observation.
3) Chat GPT and option trading. What I write about is something it will never understand. My trading approach is atypical.
4) Everything you know about Tesla doesn't really matter when it comes to trading Tesla on Friday morning "one-day-to-expiring" options. One day option players learn to chase the charts. Why hold onto any postion if you caught a short term spike in the right direction? Why push your luck knowing that there will be more action like this one week out.
5) Taking profits to quickly is a nagging reoccurance. It's the flip side to what I just said about selling out on spikes. Taking profits on a Monday on "short-term-options" positions is a good idea. Things happening four days out means that your stuck watching them hour for hour for the next four days. Who wants that hassle? With Thursday and Fridays option playing it's a different game.
6) On a differing note I listened to a conference call this morning on a drone company called "Airo Group". Try and find out if you can still listen to it. It's amazing all the loops these drone companies have to jump through to get the certifications they need to move forward and how they are all busy chasing down the large pools of available U.S. and Canadian government money. Finally it's amazing all the setbacks they have to face to get to where they are hoping to go. Many of these companies are now finding themselves to be doing joint ventures to help speed up their production times to stay in the game. The time spent on learning about these different drone companies is time well spent.
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