We are in a sweet spot for option trading as the market is nearing a major crossroads in the days ahead. Although the opportunities are building to the short side, the recent swing up in TSLA, a move signaled by TSLA's Intermediate Term Trend Model on Jan 6th, has us on alert for signals no matter how they may be pointing. Accordingly, a short tutorial of how these signals can integrate with the leverage of both long and short-term options. TSLA - Intermediate Term Trend Model: Current Signal: A Buy was triggered (blue arrow) on Jan 6th @ $131 Why Sells Matter, Even TSLA Sells Below is a TSLA Trend Model Sell Signal that triggered on April 11, 2022 @ $336. At the time, the 1-year out far out of the money put - Mar 2023 $200P - was trading at $2.75, or $275 each. This Sell was reversed 52 days later with a Buy Signal @ $205 on Jun 2, 2022. TSLA: April - May 2022 April - May 2022: TSLA Mar 2023 $200P As TSLA fell over $100 this over one-year out put rose from 2.75 to 11.00, a 4X increase in about six weeks. The TSLA Trend Model subsequently reversed Long on June 2nd with the March 2023 $200P then trading then at $7.30. Holding from signal-to-signal resulted in a return of 165%. Using a 50% trailing stop on that 300% gain would have resulted in a gain of 150% (300% max gain divided by half). In this case managing the trade either by a 50% trailing stop or merely trading signal-to-signal resulted in about the same return. The Real Money The real money would had been made with a more aggressive strike/expiration. The June 2022 $300P would have cost about $3.00 ($300) on April 11th, and would have risen to be about $100 in-the-money as TSLA fell to an interim low about $205 in late May. The June 2022 $300 put would have been priced closer to $125 ($12,500), a return of over 4,000%. In the past four years we have had two 5-digit percentage gains from TSLA calls. The last one was in January 2021, two years ago. In other words, it's about that time. Heads-up for the next TSLA option trade signal, either a fresh Sell, or, a Repeat Buy in the days ahead.
