Tesla Motors Inc (NASDAQ:TSLA) shares moved slightly lower in intra-day trading after a couple of strong trading days. And as always, the debate about whether they will go higher or lower rages on. One Seeking Alpha contributor thinks we will continue to see volatility in Tesla, although the writer admits that whether they’ll go up or down significantly over the next six months remains to be seen.
Tesla sees unending volatility
Seeking Alpha contributor Quoth the Raven thinks shares of Tesla Motors Inc (NASDAQ:TSLA) “definitely, surely, assuredly, certainly” won’t still be trading at their current levels of around $140 at the beginning of the second quarter of next year. The contributor looks at what could move Tesla shares in either direction and offers some possibilities for investment into the stock.
There’s no doubt that Tesla Motors Inc (NASDAQ:TSLA) has seen more than its share of volatility over the last several months. It peaked at around $190 a share, dipped down to $120 and had since recovered a bit to $140 a share. And all of those changes have covered only two earnings releases. The automaker’s shares have swung 10% in either direction on more than one day. The volatility basically comes from the day’s news, which generally hits Tesla shares immediately, moving them in either direction.
What Tesla will show us
Because of the tendency of Tesla Motors Inc (NASDAQ:TSLA) shares to have a knee-jerk reaction to virtually any kind of news, he notes that whatever the company has to say over the next couple of quarters is going to make a huge difference. It will be reporting results from the December quarter and hopefully updating its guidance. In addition, the automaker is going to have to show progress on the battery supply constraints it has been dealing with.
Other issues remain the National Highway Traffic Safety Administration’s investigation into the Model S fires, whether the automaker can keep meeting its goals and whether it can keep up with production.
Potential Tesla trading strategy
The Seeking Alpha contributor expects Tesla Motors Inc (NASDAQ:TSLA) shares to move higher after a potentially favorable report from the NHTSA and maybe some surprising metrics from the automaker’s December quarter report. He says one option investors might consider is insuring their bet with options. Bullish investors could write calls which are 10% above their cost basis, while bearish investors could short it and then sell puts or go long on calls.
The writer also suggests an options spread, which helps reduces risks due to volatility as well. He examines the purchase of $140 calls for $1905 and puts for $17.03. And for the long term, he remains bullish on Tesla Motors Inc (NASDAQ:TSLA). He thinks the automaker has demonstrated that it has the product, the team, the leadership and execution abilities. However, he also believes that CEO Elon Musk is a key part of the automaker’s success and that Musk, must stay with Tesla for a few more years.