Why Do People Keep Betting Against Elon Musk?
Elon Unveils The Future
Two weeks ago, Elon Musk unveiled Tesla's (TSLA) new Robotaxi, along with its Art Deco Robovan, and Tesla's Optimus humanoid robots. I followed the commentary and video clips on X at the time, and found the event impressive. Below is CNET's 8-minute supercut version, if you missed it.
The phrase that came to mind the night of Tesla's "We, Robot" event was, "Elon unveils the future".
Fools Bet Against Him
The morning after that "We, Robot" extravaganza, Tesla shares sank in the pre-market.
Amazing how people keep betting against the greatest industrialist in our time.
— David Pinsen (@dpinsen) October 11, 2024
By midday the following Monday, Tesla shares were down more than 10% from where they had closed before the Robotaxi event.
We Did The Opposite
That Monday, we took advantage of the pullback to place a bullish bet on Tesla (Tesla was one of the "two other beaten-down stocks" mentioned in the sub headline of our Boeing (BA) trade alert).
As we wrote there,
Our Second Bullish Bet
Our second bullish bet is on Tesla (TSLA 0.00%↑), shares of which tumbled Friday after its Robotaxi event on Thursday. Again, it seems like a modest positive movement post-earnings is more likely than a negative one here.
Our trade is a vertical spread expiring on October 25th, buying the $225 strike calls and selling the $227.50 strike calls for a net debit of $0.83.
The max gain with that kind of call spread occurs when the stock is trading above the higher strike, in that case, $227.50. Tesla closed at $213.65 on Wednesday, but shares spiked to $239.45 after hours, after the company reported an earnings beat and expanded margins.
This morning, we exited our call spread at a net credit of $2.46, for a profit of 196%.
Not The First Time We've Taken Advantage Of A Tesla Pullback
We placed a longer-term bullish bet on Tesla back in April, when its share price was below $200. If Tesla shares are trading above $205 in mid-January, that trade will be another ~200% gainer.
The Main Risk For Tesla
As we wrote here in August, the main risk for Tesla is Kamala Harris winning the election in November.
The Final Countdown For Tesla
— Portfolio Armor (@PortfolioArmor) August 9, 2024
The establishment sees Elon Musk as a "menace to democracy", so Trump's election is a must-win for him.
If Kamala wins, they will make an example out of Elon and his companies. $TSLAhttps://t.co/yc0lsDPuUC
A New Way Of Hedging That Political Risk
In that post, we mentioned one way of hedging that risk if you're long Tesla: buying an optimal collar on Tesla expiring past the election. We demonstrated how to scan for an optimal collar using the Portfolio Armor iPhone app in the TikTok video below.
@dpinsen ♬ The Final Countdown - Europe
Another way to hedge that political risk would be to bet on Kamala Harris winning the election (We have taken the opposite side of that trade).
Until recently, Predictit and Polymarket were the two main markets to bet on the election, but now there's a new competitor: Kalshi. Unlike PredictIt, Kalshi doesn't cap positions at $850, and it doesn't take a 5% fee on the way out (currently, there's no fee). And unlike Polymarket, Kalshi is legal in the U.S., so you can fund an account with cash. They also pay a money market-like yield on your cash in between bets.
If you'd rather hedge with options, you can download our optimal hedging app by aiming your iPhone camera at the QR code below, or tapping on it, if you are reading this on your iPhone.
And if you want a heads up the next time we place an earnings trade, like the one we just exited on Tesla, you can subscribe to our trading Substack/occasional email list below.
If you'd like to stay in touch
You can scan for optimal hedges for individual securities, find our current top ten names, and create hedged portfolios on our website. You can also follow Portfolio Armor on X here, or become a free subscriber to our trading Substack using the link below (we're using that for our occasional emails now).