Mike Khouw, a seasoned Wall Street observer, believes the new "Cybercabs" from Tesla represent a significant leap forward, potentially reshaping the perception of the electric vehicle giant. Witnessing these wheel-less, pedal-less vehicles on the roads of Northern California, particularly in Palo Alto, has provided Khouw with a firsthand glimpse of what he calls "the future is now." While the market often operates on short-term sentiment, Khouw suggests this visible rollout of autonomous technology could re-energize Tesla's narrative from a mere EV maker to a world-changing innovator.
Shares of Tesla, currently trading below their 52-week high, have seen a recent boost, closing near $376 after a notable jump on the Cybercab's launch day. Khouw proposes a specific options strategy to capitalize on this momentum:
- Buy TSLA Dec 390 calls at $32.50
- Sell the Oct 23 weekly 425 calls at $9.50
- Sell the Oct 23 weekly 330 puts at $7.30
- Net debit: $15.70
This strategy leverages bullish technical indicators like MACD, DMI, and RSI. To mitigate the cost of the longer-dated call option, Khouw employs a short strangle using nearer-dated options. The goal is for the shorter-dated strangle to decay faster in value than the long-dated call, effectively lowering the cost basis of the overall position. If Tesla's stock price stays within the 330-425 range by the expiration of the short options, they expire worthless, leaving the trader with a lower-cost long call. Khouw notes the flexibility to adjust the short options as needed.
The potential price paths for Tesla are considered. A move towards the $390-$410 range would allow the long call to retain its time value, offering opportunities to adjust the position. A rapid surge above $425 before October 23 would present a favorable outcome but necessitate a decision regarding the short call. A decline below $330 would put the short put at risk, though this is a defined risk, and assignment would mean acquiring stock at a discount. Importantly, even if assigned on the put, the trader would still hold the longer-dated December calls, providing an upside potential if the stock recovers.
While acknowledging that competitors like Waymo have greater scale and trip volume, Khouw emphasizes Tesla's proven ability to deliver superb EVs at scale. The Cybercab, a two-seater with limited cargo, requires increased utilization and regulatory approval to optimize its unit economics. However, Khouw challenges anyone to identify another company that has demonstrated Tesla's prowess in large-scale EV production.
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