Mike Khouw's Tesla Options Trade

Mike Khouw spoke on CNBC's "Options Action" about a bullish options trade in Tesla Inc TSLA.

He said that the $360 price level is very important because of the convertible bonds that are due for payment in March. Bondholders can convert the bonds into equity at $360, so if the price remains lower, Tesla is going to have to make a cash payment. Khouw has also noticed that there is a high short interest in the name and he thinks that this could push the stock towards $420.

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To make a bullish bet, Khouw wants to buy the January 375/420 call spread, which was worth around $16.6 when he was looking at the structure. By the end of the day, the stock traded lower and the call spread can now be purchased for less.