It's time to start thinking about Tesla (TSLA) again. My reasoning is set out in relevant part below in this subscriber update sent out to Blue Line Premium Trading subscribers on June 10, 2021. For the rest of this year and well into next year we will be accumulating TSLA calls in anticipation of the ramp up of volume production of Cybertruck (1,000,000 pre-orders), game changer new battery technology (4860) and its perpetual sold out global production. This is as good a time as any in the 11 years of Blue Line Trading to subscribe to the Premium Service ($99/mo) and for short-term traders the PRO Service ($249/mo). Our previous coverage in 2019-2021 resulted in 1,000% gains in the shares and 11,000% gains in long-term call options (LEAPS). I don't expect quite those returns this time, but I didn't expect them the first time either. Like the rest of the world, I underestimated Elon Musk.
If a subscription does nothing else it could just be the push needed to jump into this once in a lifetime stock, actually now twice is a lifetime. The enormity of expectations aside, Tesla, Again: Take That To The Bank.
Blue Line Trading (June 10, 2021)
In Dec, 2019 I sent out the "Game Changer" white paper in which we initiated a Long position in TSLA at $70. In the ensuing 13 months TSLA rose to $900, a gain of 12X the original investment. The recommended Jan 2021 $84 LEAPS rose from $740 at expiration, a gain of approximately 10,000% I have not been this bullish on TSLA since then.
*all above prices adjusted for 5:1 stock split effective Aug 31, 2020.
A repeat performance would have TSLA trading at $7,200 by next Spring. Not likely by then, but it is increasingly likely TSLA will reach at least half that price ($3,600) by 2025 as its full slate of current products reach volume production. There are currently over 1 million pre-orders for the Cybertruck, a $10K electric vehicle tax credit working its way through Congress and an incredible $25,000 "Tesla Model 2" on the drawing board. With that share price and timeline as our GPS, we can ignore any short-term wiggles or even market crashes so long as our focus is long term with our eyes on the prize. In the weeks and months ahead I'll fill in the details as to why that price point is more grounded in reality than fantasy, but for now I want to lay out a strategy for benefiting monetarily from any such move.
First and foremost in 24 months I expect TSLA to be trading north of $2,000/share. Accordingly the shares are a BUY at any price, even today's $610. In addition, a close above $635-$650 is a short, intermediate and long-term Buy. Anything in the $500's will in two years look like the steal of the decade. Spikes lower, caused by a news event or an unexpected number in an earnings report, are add-on buys. A market crash, is an add-on buy. A six-month bear market is an add-on buy. In case of a deep general market decline we should be well positioned with index puts to hedge any paper losses in TSLA, and then some. Some of those index put gains should be used to fund add-on TSLA buys. In other words, Buy TSLA shares and/or LEAPS no matter what happens.
Second and more nuanced is the accumulation of TSLA calls, LEAPS that go out over one year to expiration. The good news about calls is what we described above, a 10,000% gain in a little over a year - we saw that it is possible to make outsized, some would say obscene, returns with options. The bad news is if the anticipated price advance doesn't happen before expiration, all could be lost. To mitigate that risk it is important to buy TIME over PRICE. The longer the window of opportunity, the better the odds of capturing the anticipated price movement before option expiration. The expectation is exponential growth, i.e., once TSLA breaks above $1,000 then $1,500 comes into view and after that, $2,000. That should all happen within 24 months, that's nine quarterly earnings reports from now. As I will describe in the weeks ahead, the fundamentals are there to support those prices in a 12-18 months, let alone the two years captured with the June 2023 LEAPS:
TSLA Jun 2023 (737 days) $1,000C costs about $10,000. At TSLA $2,000 those calls will be worth at least $100,000.
TSLA June 2023 $1,200C costs about $8,000. At TSLA $2,000 those calls will be worth at least $80,000.
TSLA Jun 2023 $1,400 costs $6,500. At TSLA $2,000 those calls will be worth at least $60,000.
Buying less time, for example the last quarter of 2022, the LEAPS will cost less, with higher net returns, but the window for $2,000 is not as long and time could become an enemy. We will have shorter term trade opportunities throughout the rest of 2021 and 2022, but for an initial long term option position, 2023 is the best time frame: January, March or June.