When we entered the trade, TSLA was setting up beautifully for us. There’s no question the Street was preparing for this stock to crater after The Wall Street Journal reported Monday that sales over the last nine months had fallen 26%. The stock was down nearly 6%, and I have little doubt it would have fallen further, except CEO Elon Musk changed everything with one tweet that said the sales numbers reported by the Journal were incorrect. That was enough to bring in buyers, and in addition to the stronger market, we saw a classic short squeeze helped drive the stock even higher. Those who were short TSLA scrambled to buy back shares to return them to their broker, which only added to the upside momentum.
Our puts turned against us on a dime, putting us in a tough spot. They quickly fell out of the money, and any premium that was in them also virtually disappeared. The question at that point became whether to sell right away or see if another development would knock the stock back down and give us a better exit price. Because most of the value was gone in a flash, there wasn’t much value to salvage at that point, and it was better to hold the next few days to see if the Journal came out with a statement that it stood behind its report, a headline hit the overall market, or any number of possibilities that would have helped our trade.
While the stock did move slightly lower a few times, we did not get a significant enough drop to help our puts. So as I said, at this point, it is best to let the options expire worthless today to avoid any trading costs, knowing that we’ve had a good stretch in this more tradable market, and that we’ll get back to cranking out more winning trades.