Options Trading & Analysis

Optimizing Short Puts in TSLA


Tesla's stock has had a volatile ride -- bull or bear, you could have proclaimed victory at various points.

But, if we look to the option market, it turns out one strategy with a clever wrinkle that avoids risk has been a winner across the board for the last three-years, two-years and even the last six-months. Here it is:

If we sold a naked out of the money put in Tesla Inc (NASDAQ:TSLA) every week over the last-three years we got these results:


Even though the trade is positive, we could make a pretty strong argument that there is way too much risk in this strategy to return 'only' 78%. Let's make that argument, and see what would have happened if we sold that same out of the money put, but this time put a stop loss on each trade.


It's remarkable, but as we throttled the risk with a stop loss, the trade went from a 78% winner to nearly 200% with less risk. Now, that may sound too good to be true -- sort of like cherry picking a randomly good result, but it isn't.

Here is that exact side-by-side comparison for the last two-years in Tesla Inc (NASDAQ:TSLA):


Yeah, a 14.9% return with a truck load of risk turned into a 141% return with less risk. We can do this over the last six-months as well:


Again, the implementation with less risk dominated the one with more risk. With Tesla Inc it actually goes further. If we were to do this same trade but always avoid earnings, we get yet different results.


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About Ophir Gottlieb


Mr. Gottlieb writes financial news for CML and also as a contributor to Yahoo! Finance, CNN Money, MSN Money, and before then for Marketwatch, Business Insider, TheStreet and Real Money. He has become a staple in financial TV, often times seen on the Business News Network and CBC. Mr. Gottlieb's experience includes working as an option market maker on the NYSE ARCA exchange floor (CBOE remotely), as Managing Director of Client Services and Algorithmic Trading for Livevol, Inc, and as the Managing Director and Product Manager of Quantitative Research for GMI (now MSCI). Ophir Gottlieb is inventor of the Forensic Alpha Model (FAM) and a co-inventor of Accounting and Governance Risk Model, both purchased by MSCI. FAM has been a celebrated achievement in artificial intelligence and quantitative finance that was introduced to world by the Rotman International Journal upon its completion. Mr Gottlieb's mathematics, measure theory and machine learning background stems from his graduate work at Stanford University and his time as an option market maker on the NYSE and CBOE exchange floors. He has been cited by various financial media including Reuters, Bloomberg, Wall St. Journal, Dow Jones Newswire and through re-publications in Barron's, Forbes, SF Chronicle, Chicago Tribune and Miami Herald and is often seen on financial television.

Author's web site: http://bit.ly/2mnZAmV


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The Options Insider Radio Network

The Options News Rundown

Your source for the most important news and information from the world of options.

The Options News Rundown

The Options Insider Radio Network

All of our radio programs in one convenient place.

The Options Insider Radio Network

Options Insider Radio

The original options podcast. Features interviews with leading options figures.

Options Insider Radio

The Option Block

This high-octane program features education, analysis, strategies and unusual activity.

The Option Block

Volatility Views

The premier radio program for volatility traders.

Volatility Views

The Long And Short Of Futures Options

Your source for futures options information.

The Long And Short Of Futures Options

The Advisor's Option

Arming advisors with the info necessary to manage risk.

The Advisor's Option

Options Boot Camp

Get into peak options trading shape.

Options Boot Camp

Options Insider Special Events

Compelling panel & special event recordings from the options world.

Options Insider Special Events

OIC's Wide World of Options

A dynamic mix of current events, investor resources, & strategy insights.

OIC's Wide World of Options

Trading Tech Talk

We break down all the amazing technology that takes your trades from the click of a mouse to the clearinghouse.

Trading Tech Talk

Options Playbook Radio

Break down cutting-edge options strategies and learn how to incorporate them into your portfolio

Options Playbook Radio

Options Oddities

We track all the unusual options trading activity on Options Oddities.

Options Oddities

This Week in Futures Options

The program designed to help active futures options traders stay on top of this ever-changing marketplace. 

This Week in Futures Options

The Business Show

If you like business, if you like humor, if you like stock symbols, this is the podcast for you.

The Business Show