Tesla Motors

Come on, you know this one. It's that car company that only makes gorgeous looking all-electric vehicles.

Reasons to hold

This one is pure speculation, I don't have anywhere near the same level of reasoning as I have previous trades. I think electric cars are the future, and this things look stunning. If they were slightly more convenient (I'm renting, I can't just install a supercharging station in the street) I'd probably have bought one already.

I'm seeing Tesla (TSLA) as an all or nothing type of company. They're either set to explode and change the way we all think about fuelling our vehicles, or they'll disappear under the weight of their expectations and be a footnote in the history books.

The trade

I bought 1 option contract for the 17th of January 2015 at a strike price of $285 at $13.00, total cost was $1,300 (1 option contract x 100 shares x $13.00 premium). Note the expiry is almost 18 months away. If in that 18 months TSLA manages to double in value then I stand to make a tidy profit. For example if they do double and are trading at $338 in January 2015 then my gain stands to be approximately $4,000. That's because my strike price is $285, the stock price at the time $338, and so it's reasonable to assume someone would be willing to pay a $53 premium ($338 stock - $285 strike) for my option contract, netting me income of $5,300 ($53 option premium x 1 option contract x 100 shares). Alternatively I could exercise the option myself and then immediately sell the TSLA stock I now own, the math would work out the same. From that $5,300 windfall you need to subtract the initial $1,300 outlay to buy the option. So net gain is $4k.

But, if TSLA are trading at anything less than $285 in January 2015 then I've done my money.

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