How to Buy Tesla on Dips Using Options How to Buy Tesla on Dips Using Options How to Buy Tesla on Dips Using Options

How to Buy Tesla on Dips Using Options

Sean Teo

Sales Trader

Summary:  Tesla stock is now down 58% from the highs of $414.50 in November 2021. In contrast, S&P 500 was up 37%. Why has Tesla been declining and more importantly, is Tesla a buy now?

Tesla VS S&P 500

Why has Tesla been declining?
Tesla has been facing a number of key challenges in the past 2 years, mostly from competition from global brands, in particular Chinese EV makers. Some of the key competitors include BYD, Xiaomi, Rivian, Nio, Audi and Mercedes. As a result, Tesla has resorted to price cuts to stay competitive and as a result led to lower margins.

Secondly, the market’s premium on Elon Musk is beginning to diminish as the firm continues to struggle in recent times. Expectations have been set high and the market has been repricing this premium over the past year.

Thirdly, the elevated level of interest rates does have an effect in reducing overall demand of luxury goods. As Tesla is priced and marketed as a premium brand, cheaper alternatives are more appealing in this environment.

When is a good time to buy Tesla?
Although it is challenging to pick the bottom in any stock, investors who have been waiting for this dip would be happy to know that you don’t have to buy the absolute bottom to build a good portfolio over time. Often, it is as important to create a structured plan to accumulate shares over a period of time to take advantage of dollar cost averaging and bet that markets in general rise over time, especially market leaders.

What can you do?
Clients can choose to accumulate Tesla shares over time by selling cash secured puts, which enables them to earn premiums while waiting for the price to move to their desired purchase price.

This is especially useful if a trader/investor is bullish on a stock over the longer term but believes that there could still be some downside to the stock price in the short term. This can happen in bullish, bearish or even volatile markets. In fact, volatility would be good for option premiums.

Example: The investor is interested in buying Tesla at $150 while Tesla is still trading at $172.98 on 8th April 2024.

Investors can sell a cash-secured put option with a strike of $150 and expiration date of 10th May (31 days to expiry). By selling the option, you receive a premium of $327 ($3.27 x 100 shares) from the buyer of the option.

2. Setting aside sufficient cash of $15,000 ($150 x 100 shares) to cover the potential purchase of 100 Tesla shares at $150 if the option gets assigned.

3. Two
 potential outcomes:
a) If Tesla remains above $150; you’ll keep the premium of $315.
b) If Tesla falls below $150; the put option may be exercised and you’ll need to buy 100 shares of Tesla at $150.

Annualized yield of 21.95% derived by (3.27/172.98) x (360/31)

Comparing with a longer maturity, you can see how this changes the premium you receive and how far you’ll be able to strike.

  • For the same strike at $150, the premium increases to $7.78 as the duration increases to 101 days. (Annualized yield 16.03%)
  • For a similar premium of $3.34, you can now stretch the strike to $130 as the duration increases to 101 days. (Annualized yield of 6.88%)
How premium yields change with strike and expiry

What if Tesla reverses higher?
If you are concerned about missing out on the upside if Tesla starts rallying from here on, you can consider buying an out of the money (OTM) call option in addition to selling the put option. This is called a risk reversal strategy. For a premium of $3.31, you can buy an OTM call option at $200, expiring in 31 days. Therefore, if Tesla rises above $200, you will be effectively long from $200 at expiry.


The Saxo Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (
- Full disclaimer (

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo or its affiliates.

Saxo Capital Markets HK Limited
19th Floor
Shanghai Commercial Bank Tower
12 Queen’s Road Central
Hong Kong

Contact Saxo

Select region

Hong Kong S.A.R
Hong Kong S.A.R

Saxo Capital Markets HK Limited (“Saxo”) is a company authorised and regulated by the Securities and Futures Commission of Hong Kong. Saxo holds a Type 1 Regulated Activity (Dealing in Securities); Type 2 Regulated Activity (Dealing in Futures Contract); Type 3 Regulated Activity (Leveraged Foreign Exchange Trading); Type 4 Regulated Activity (Advising on Securities) and Type 9 Regulated Activity (Asset Management) licenses (CE No. AVD061). Registered address: 19th Floor, Shanghai Commercial Bank Tower, 12 Queen’s Road Central, Hong Kong.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products may result in your losses exceeding your initial deposits. Saxo does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo does not take into account an individual’s needs, objectives or financial situation. Please click here to view the relevant risk disclosure statements.

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit

The information or the products and services referred to on this site may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and services offered on this website are not directed at, or intended for distribution to or use by, any person or entity residing in the United States and Japan. Please click here to view our full disclaimer.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc. Android is a trademark of Google Inc.