That's a lot of money to burn through in a single quarter – especially in a quarter where not only were just 260 Model 3s actually delivered by Tesal (TSLA) but they have now pushed back full-scale production targets through March, so 2 more lost quarters ahead, with Q4 losses now estimated at an even $1Bn.
This can only mean one thing – Morgan Stanley will be ugrading TSLA any moment! That's what usually happens when one of their leading underwriters has to defend the company's poor ACTUAL earnings. Just a month ago, Nomura gave them a $500 price target – these analysts truly have no shame (or common sense!). Our take on Tesla has been somewhat more negative (see February's "Tesla’s Emperor Musk Has No Clothes!" or May's "Tesla’s Earnings Miss – Emperor Musk has no Clothes!" or "Tuesday Turmoil – Tesla Valuation Reaches Peak Insanity") and, though we were often early, our Tesla shorts have all wound up being successful, so far.
On Tuesday, right here in the Morning Report (which you'd be foolish not to subscribe to HERE), our Trade Idea for this earnings period was:
- Sell 6 TSLA April $350 calls for $23 ($13,800)
- Buy 6 TSLA April $370 puts for $65 ($39,000)
- Sell 6 TSLA April $320 puts for $34 ($20,400)
That nets you into the $30,000 short position for $4,800 with a $25,200 (525%) upside potential if TSLA is below the current price of $320 in April. It's a lot of margin ($15,465 ordinary margin) and a lot of risk – if TSLA gets back to $380, you will have to pay the short caller $18,000 but we'd roll them along to higher, longer months. Of course, if TSLA does well then maybe our oil play does well (more electric cars) and that one we can make $2Bn on!