To the Moon Tuesday – Driven by Tesla!

Tesla $300 a share!

Well, not yet, but they are at $93 and up another 6.2% for the day in pre-market trading as Morgan Stanley puts out a note calling them "A Short Seller's Nightmare," which they are, up 177% for the year and up 57% in the last 3 sessions, during which 100% of the float turned over so, in other words, every single person who owned TSLA last Tuesday has had the opportunity to get out at record highs since then.  If this is giving you flashbacks to the dot com days – welcome to the club.   I picked TSLA as one of my 3 favorite stocks of 2013 but we certainly weren't prepared for this.  

In fact, just yesterday, we took a short play on TSLA's rally, buying 5 of the 2015 $85/115 bull call spreads for just $7 in our virtual $25,000 Portfolio and selling 5 of the Juen $85 calls for $8.60 for a net credit of $1.60.  Our logic was that $85 was ridiculous and unsustainable yet up another $10 this morning (yes, it gained $2 more while I'm writing this) means we may need to add more longs already.  And what fun it is when you can buy a $30 spread for $7 on a Monday afternoon and, by Tuesday morning, you're already $10 in the money!  These are the kind of market-distorting profits I was complaining that we shouldn't be able to make on Friday but, if they keep giving them to us, we'll keep taking them.  

We also shorted Elon Musk's other company, SCTY, in our $25,000 Portfolios, as they had also had a ridiculous run-up, probably assuming the TSLA magic would rub off.  It didn't, they missed.  On that one we took 10 of the tighter October $30/35 bull call spreads for $2.50 and sold 5 of the June $40 calls for $5 for a free play and, as expected, SCTY is down 6% pre-market, mirroring TSLA's up move as they missed, losing more money per share (.41) than expected.  

At least that one makes sense and our trade works because the short calls expire worthless and we keep the remaining value on the long spread (maybe $1) for a $1,000(ish) profit.  Not too bad.  The TSLA trade, on the other hand, becomes problematic if TSLA goes over $115 and, ridiculous…