I would like to start by saying I could care less for Tesla Motors (TSLA). When I heard of the IPO, I thought to myself, this is just another company taking advantage of the “green” excitement going on because of the BP oil spill. Every venture capitalist I speak with, all they can talk about is clean-tech, green energy, renewable energy.
What excites me are the options.
Whenever there is a IPO, the options do not get listed for a few weeks due to the volatility that comes with every IPO. No market maker is interested in listing options on a stock that can go up 100% and then drops 50% in a matter of two weeks.
When the new options are finally listed, they have a very short time frame to reference for the historical volatility. A typical stock has years of data so the historical volatility is very accurate and the implied volatility is adjusted accordingly.
Implied volatility for TSLA right now is 155 for the July contracts with one week until expiration and 120 on the August contracts!
This gives us some great opportunities for a covered call trade.
Currently I have an order to buy the stock and sell the $15 July Calls for a net price of $13.65. This gives me the potential to make 10% in one week. We will see if I actually get filled on my order. The spread at the time of writing is $13.93 – $14.47.
As much as I don’t like the stock, I feel that the market markers and underwriters of the IPO have it in their best interest to keep the price of the stock no more than 10% below the IPO price.
I will be watching this stock for the next three weeks to see if there are any covered call opportunities on the August options.
Disclosure: No positions