Tesla earnings are always a showstopper, and this week’s report after the close Wednesday is no different.
With Tesla’s volatility — especially around earnings — I’m preparing for two potential outcomes: a breakout or a breakdown.
Here’s my strategy to navigate the earnings with a bull-put spread that offers both income potential and protection against a downturn.
Right now, Tesla is trading around $217, and I’ve set up a bull-put spread with a Nov. 15 expiration. The trade is pretty straightforward — I’ve sold the $225 put and bought the $220 put, collecting $2.70 of income on the trade.
If Tesla posts solid earnings and rallies, this trade should easily profit as the stock moves back up toward that $238-$240 level. A positive earnings push could fill that gap and give us some breathing room.
However, I’m also preparing for the possibility that Tesla disappoints.
If earnings miss expectations — whether it’s from lackluster robotaxi news or any other negative development — Tesla’s volatility could kick in hard. But I’m not worried.
Even if Tesla gaps down, I’m protected by the long put at $220, which will hedge against major losses. This allows me to manage the trade and potentially own shares at a lower price if the stock gets punished.
What I’m particularly interested in is how Tesla will behave if we see a gap lower. There’s a lot of structure around the $200-$210 range, and I wouldn’t be surprised if we see the stock find support there IF there’s a big negative reaction.
If that happens, I’d be looking at an opportunity to scoop up shares and ride the bounce as Tesla fills those gaps and eventually returns to higher levels, flipping for an extra $5, $10, $15 or more per share.
If Tesla’s earnings hit big, we’re looking at a straight shot back to $240, and this bull-put spread will easily pay out. If the stock tanks, my long put will help offset losses, and I’ll look to buy shares for a longer-term recovery.
Either way, this strategy gives me the flexibility to handle the volatility Tesla is known for while limiting my risk.
As always, I’m managing this with an eye on the technicals and keeping in mind that Tesla could swing wildly in either direction. That’s the nature of this beast — but with a smart strategy like this, you can navigate those swings and come out ahead, no matter the earnings result.
With Tesla, it’s all about having a plan — and this bull-put spread sets me up for success, whether the stock soars or stumbles after earnings.
I’ll see you in the markets.
Chris Pulver
Chris Pulver Trading
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*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk.
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The profits and performance shown are not typical, we make no future earnings claims and you may lose money. The results shown are from an 11 year backtest on 550 trades. The result was a 97.1% win rate, 17% average return (winners and losers) with an average hold time of 11 days.