Mike Khouw's Bearish Tesla Trade

On CNBC's "Options Action", Mike Khouw shared with the viewers his options trading strategy in Tesla Inc TSLA.

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The company is going to report earnings on Wednesday and Khouw wants to set up a bearish trade. He wants to buy the August 335 put for $14.90 and sell two August 310 puts for $6.20 each. The options structure is going to cost him $2.50 in total and the trade breaks even at $332.50.

Khouw could make a maximal profit of $22.50 with the trade, if the stock drops 7.48 percent to $310. If the stock drops below $310, Khouw is going to have to own it at $310. He would start to lose money below $287.50.