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Tesla Volatility Trade: Simple Strategy For Consistently Higher Returns

|About: Tesla, Inc. (TSLA)
Summary

The returns of the simple buy-dip strategy for the Tesla stock (TSLA) is significantly superior to the buy-and-hold.

TSLA buy-dip 80%-percentile returns over 2 times higher compared to the buy-and-hold.

We analyze the returns of the simple buy-dip strategy for the Tesla stock (TSLA) and will show you that the strategy is significantly superior to the buy-and-hold and, for example, yields the 80%-percentile returns over 2 times higher compared to the buy-and-hold.

For our analysis we are using the openly available simulation tools from www.InvestmentStrategy.Co.

We are evaluating the returns produced by the variations of the buy-dip for TSLA: buying on a 3% dip from the all-time-high and selling when the stock recovers, as well as buying the dips of 5%, 10%, 15%, 20%, 25%, 30% and 35%.

We are considering investing for the period of 3 years. Sign up to explore the statistics for other periods.

Our service collects the statistics by evaluating the returns and the losses across all 3-year periods from 2011 till 2019 (one week step).

Statistical results

We are reviewing percentile 80% (as opposed to the median) to gain higher-confidence estimates of the performance and the losses.

TSLA stock strategy Annualized return (80% percentile) Maximum draw-down (80% percentile)
Buy-and-hold 9.15% -35.47%
Buy 3% dip 8.15% -35.69%
Buy 5% dip 12.85% -32.95%
Buy 10% dip 15.60% -29.82%
Buy 15% dip 14.72% -31.20%
Buy 20% dip 22.95% -20.28%
Buy 25% dip 16.81% -15.43%
Buy 30% dip 24.15% -11.31%
Buy 35% dip 22.91% -2.10%

Read as follows: For 35%-buy-dip, the returns in 80% of the test 3-year periods are 22.91% or higher and the maximum draw-down (from the original net worth) is -2.1% or better.

In the above table, please note the performance of buying 35% dips vs holding TSLA (highlighted in red).

Below, we bring the statistical reports for the two strategies for your review. As you can see, the suggested strategy offers higher returns that are significantly more consistent compared to the baseline buy-and-hold.

TSLA buy 35% dip: Statistical performance report

Read as follows: The annualized returns in 80% of the test 3-year periods are 22.91% or higher and the maximum draw-down (from the original net worth) is -2.1% or better.

TSLA buy-and-hold: Statistical performance report

Read as follows: The annualized returns in 80% of the test 3-year periods are 9.15% or higher and the maximum draw-down (from the original net worth) is -35.47% or better.

TSLA buy 35% dip: execution report on a sample period

Note: Period from 2010-12-30 to 2013-12-29

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.