Shares of electric car manufacturer Tesla Motors (TSLA) are down about 40 percent from their highs of last year. One trader sees shares rebounding in the next 11 months.
That’s based on the September 2023 $360 calls. With 344 days until expiration, 8,553 contracts traded compared to a prior open interest of 506, for a 17-fold rise in volume on the trade. The buyer of the calls paid $26.42 to make the bet.
Shares last traded for just under $250 per share, so they would need to rise $110 or 44 percent. Given the stock’s ability to make big moves, and with its split-adjusted 52-week high of $414.50 per share, such a move is possible.
Action to take: While the company’s most recent drop came from a warning on production, it’s far and away the leader in electric car production. Shares have gone from 402 times earnings last year to 45 times forward earnings now, one of the company’s best valuations ever.
There’s likely more upside to the company here, with shares now out of favor with the market.
For traders, the calls have plenty of time to play out, and are far out of the money. While still a bit expensive, it’s a reasonable trade that could deliver mid-to-high double-digit gains, potentially well before expiration if a new market rally kicks off next year.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.