Short squeeze on Tesla sends it ballistic. Double your money in three days with this easy trade

Tesla (NASDAQ:TSLA) is everyone’s favorite stock to short because it’s way over priced. However, when you short a stock, you need to borrow it from someone, sell it, and then BUY IT BACK when you want to close your position.

Tesla’s lack of available shares meant all the short sellers were in the market at the same time, competing against each other to buy to close. Naturally, this sent the shares soaring, triggered a bunch of trading programs, and resulted in Tesla jumping 12% in a day. It’s now up almost 30% since the start of the month.

The company is now worth over a trillion dollars, which would make sense if it’s net profit were 100%. Then it would be trading at 25x earnings instead of 25x revenue.

But I digress. There’s no point in even glancing at fundamentals in this situation. All we know for sure is that the stock will go up, or down, or sideways.

My guess is that it will go both up and down. I’ll probably be wrong, so let’s do a trade that accounts for that too. On previous occasions, the shareprice has always tanked from here. But as I said, I may be wrong.

Here’s how to play it.

As I write this, TSLA is trading at 1024.86. If we buy a straddle we profit on the share price moving outside of a range.

Right now you can buy TSLA 1050/1100 call spread for 9.50. Similarly, you can buy a 1000/950 put spread for 10.65. The cost of the two legs is 20.15, which is the maximum amount you are risking with this trade.

If TSLA moves more than $50 from where it is currently, you’ll make your money back. I expect it will move at least $100 up or down. If it closes at least $75 up or down on Friday when the options expire, then they’ll be worth $50, which is a juicy 150% profit.

Just to make sure you book the profit in, set up an automatic offer to close out the position for $40.30 — a 100% profit. You’ll probably get hit on this on Friday during trading, which is better than the shares suddenly jumping back to where they are now for a total loss.

For a $4,000 bet, buy to open two (2) 1050/1100 vertical call spread contracts expiring on October 29 for 9.50 ($950 per contract) and simultaneously buy to open two (2) 1000/950 vertical put spread contracts expiring on the same day for 10.65 ($1,065 per contract), or 20.15 for both contracts. I’d pay up to 20.50.

Once you open the positions, create a limit sell order for them both at 40.30 expiring at the close of trade on Friday (you don’t actually need a time limit on this).

Once you open them, sit back and enjoy the good/bad/indifferent news as we double our money!

P.

Update 30 October: $4,100 profits taken

Tesla (NASDAQ:TSLA) closed at a whopping 1,114.00 on Friday 29 October. So if you let your options expire, you would have closed your 1050/1100 calls for $50. Assuming you used the limit order as we recommended, you should have been stopped out of this position at 40.30 for a 100% return. On an initial outlay of $4,100, that’s a juicy $4,200 profit. Ka-chink!