Tesla stock provides 40% discount opportunity for investors
- Tesla has demonstrated remarkable growth, with revenues increasing by over 110% and net profit margins surpassing 50%.
- Since Tesla's stock is currently trading at approximately $343, investors can utilize long-dated put options at a strike price of $200 for significant investment leverage.
- This investment strategy highlights an asymmetric risk-reward profile, providing a potential 40% discount to buyers if the stock dips below the strike price.
Tesla, which has been a prominent player in the electric vehicle market, reported impressive financial growth in its recent fiscal year. The company's revenues surged by more than 110%, while net profit margins exceeded 50%, showcasing its strong market position. As of May 16, 2025, Tesla stock is trading around $343, leading to investment strategies revolving around put options. Investors have the opportunity to sell long-dated put options, expiring June 18, 2026, with a strike price set at $200. In this arrangement, the premium collected amounts to approximately $1,704 per contract, translating to an 8.5% yield based on the capital set aside for potential stock purchase. The market condition allows for buying Tesla shares at a significant discount of up to 40% if the stock price declines below the strike level. This decision implies an effective cost basis of about $183 per share after accounting for the premium, representing a greater safety margin for the investors. Though the automotive sector faces competition, notably from BYD, Tesla's commitment to production automation is expected to enhance pricing flexibility. The expansion into the robotaxi market and investments in Full Self-Driving (FSD) technology also positions Tesla for long-term growth. Furthermore, projects including the Tesla Bot (Optimus) and advancements in the energy sector are anticipated to evolve independently from electric vehicle sales. These investment strategies reflect an asymmetric risk-reward profile, suggesting that even at lower stock prices, the perceived value of Tesla could lead to substantial returns over time. The overarching investment strategy aligns with the Trefis High Quality portfolio, aimed at fostering enduring value creation.