Tesla Robotaxi Rollout: Useful Trading Ideas for Option Investors
by Steven Gao
Takeaway: Tesla is a highly talked-about stock with very active options trading. The official launch of Robotaxi presents a rare opportunity for investors to benefit from. The option market is deep enough; whether you're a long-side or short-side, bullish or bearish, there are always strategies for you to choose. This article will take you on a deep dive.
On the evening of June 10th, Eastern Time, Tesla CEO Elon Musk announced the first public trial operation date for Tesla's highly anticipated self-driving taxi service, Robotaxi, tentatively set for June 22nd (Sunday). Upon this news, Tesla's stock price surged by 5.89%, recovering from the plunge caused by Musk and Trump's online feud. The latest price is entangled around the 20-day-moving-average line, which equals to about 325 dollars per share.
Since first announced in October 2024, Tesla's Robotaxi has gained universe-wide interest. According to Musk's plan revealed on social media platform X: 1) It will start with 10 Robotaxis, gradually increasing to 1,000 within a few months; 2) the operations starts in Austin, then expands to San Francisco, Los Angeles, and San Antonio; 3) By the end of 2026, there are expected to be "possibly hundreds of thousands, or even over a million Teslas" in the United States.
Policy is also currently tailwind for the auto-driving sector. On June 13th, the U.S. National Highway Traffic Safety Administration (NHTSA) announced that it is streamlining its review of waiver applications from car manufacturers seeking to deploy auto-driving vehicles that do not require human controls such as steering wheels, rearview mirrors, or brake pedals.
Tesla is one of the actively traded stocks in the market. It has experienced gigantic rise and fall during the past one year. After experiencing one of its most significant surges from October to December last year, and hitting an all-time high of $488.54 on December 17th, it plummeted to $214.25 in less than three months with no negative news, wiping out all of its gains from the fourth quarter of last year. However, during the significant market rebound in April-May of this year, Tesla's rebound was noticeably weaker than the broader market. At the end of May, when Musk announced his return to the company, investors expected Tesla's operations to get back on track, then the "online duel" between Musk and Trump erupt which drove the price down.
Precisely because Tesla has so many talking points and high price volatility, it provides investors with various trading opportunities to profit. Especially in the options market, Tesla consistently ranks among the top traded stocks. So, what trading opportunities can options investors find around the upcoming Robotaxi launch? Following are two major ideas.
(1) LEAP Call Strategy
Many investor have faith in Tesla who think it's a great company that will ultimately succeed. Investors with this view either hold the stock or can hold ultra-long-term, deep in-the-money call options, known as LEAPS calls (Long-term Equity Anticipation Securities).
So, how long the options term, and how far away the strike price should be for a call option to be considered as a "LEAPS call"? Generally, the term should be one year or longer, and the strike price should be less than half of the current price.
Benefit of LEAPS call: the effective leverage ratio is generally low, which reduces the fluctuation of option price and make it easier for investors to hold it longer. Also, as it's deep in-the-money, the time value is very compressed; and because the term is extremely long, the time decay will also be slow.
The drawback of LEAPS calls is they tend to be expensive, compared to short-term non deep in-the-money ones. And the bid-ask spreads are also greater, which decreases the liquidity of LEAPs calls.
Click the link below to get further information on LEAPS: LEAPS: A Longer Term Options Strategy
(2) Cash-Secured Short Put
Tesla has always high implied volatility (IV), which provides a significant opportunities for options sellers. If an investor is bull on Tesla and bet on the stock price rise upon the Robotaxi launch event, he can use the cash-secured put strategy.
The potential benefit from a cash-secured put theoretically comes from two sources: (1) the time decay (theta effect) and (2) the rise of underlying stock's price(delta effect).
Of course, the investor can avoid the risk of being exercised by pushing the strike price low enough compared to the spot price of the stock, which would allow him to entirely collect the premium of the option – like collecting the stock's "dividend".
And also, even if the underlying's price falls low enough for the option to be exercised, which would assign the investor stock shares, as he has collected the premium in advance, his averaged cost of holding the stock is lower than if he just bought the stock directly at the strike price. The cost reduction equals to the option's premium.
For more on options selling strategies, please refer to our investor education courses: Cash-Secured Put.
Disclaimer: Options trading entails significant risk and is not appropriate for all customers. It is important that investors read Characteristics and Risks of Standardized Optionsbefore engaging in any options trading strategies. Opening new options positions close to or on their expiration date comes with substantial risk of losses for reasons that include potential volatility of the underlying security and limited time to expiration. Options transactions are often complex and may involve the potential of losing the entire investment in a relatively short period of time. Certain complex options strategies carry additional risk, including i potential for losses that may exceed the original investment amount. Supporting documentation for any claims, if applicable, will be furnished upon request.
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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S&P 500's Put/Call Ratio Hits 5-Year Low: Fear Fades and Bottom Near?
74368292 :![[undefined]](https://static.moomoo.com/nnq/emoji/static/image/default/default-black.png?imageMogr2/thumbnail/36x36 "undefined")
sunwu79 :
Aivern : this is the beginning of tesla's downfall, wait for the initial spike, load up on puts and watch elon screw his simps over again
74128907 :![[undefined]](https://static.moomoo.com/nnq/emoji/static/image/default/default-black.png?imageMogr2/thumbnail/36x36 "undefined")
![[undefined]](https://static.moomoo.com/nnq/emoji/static/image/default/default-black.png?imageMogr2/thumbnail/36x36 "undefined")
Troncoparati : The advantages of doing leaps with TSLA is the time decay gives you more time to be right. With so much volatility you can get burned doing short calls if you are caught on a down spiral like the !5% drawback at June 5th. In one day it dropped from $332 to $284. That can cripple your account if you are not setting your stop losses.
70217121 : looking in the future of Tsla.
skumaar42 : Great looking forward!
Christiandrummer : still undecided. if rollout goes well, results should pop. if it's overhyped and doesn't meet expectations prices may drop.
70217121 skumaar42 : thanks your reply!
Nektar : seems to be a double edge
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