There is an excellent new show on NBC / Peacock called THE IRRATIONAL. It’s about a behavioral scientist who is the world’s leading expert in incredibly complex behaviors such as predicable irrationality, paradoxical persuasion and attentional blindness. He helps the FBI solve crimes. Take a look at the official trailer below.
Speaking of irrational, I like to trade stock options on Tesla for a variety of reasons, one of which is that Tesla has somewhat of a “cult following”. This may explain why the stock trades well outside of reasonable fundamentals. Further, when the stock spikes, it really spikes! Some would say it behaves irrationally, so understanding this concept and the irrational behavior of other investors who are buying and selling Tesla stock and options might just, in my opinion, give us an edge.
In late 2021 and early 2022 and during a five-month period, Tesla spiked three times, each run testing their all-time stock price high of $415 (adjusted for 5:1 split). The stock price spike lasted 14.33 business days and the stock gained $118 per share, averaging the three moves.
Aside from the stock’s seemingly irrational behavior, it also reacts heavily to momentum which isn’t unusual in options trading. But momentum on top of a “cult-like following” can create a stock move on steroids. Notice the momentum shift below when Tesla stock rises or falls during this recent 6-month chart.
Aside from the above, Tesla IS the worlds’ leading electric vehicle manufacturer and has been for a decade while others are trying and realizing it ain’t easy. Further, Tesla is building a conceptual general-purpose robotic humanoid called Optimus. Tesla is also mastering power plant technology. Tesla offers solar products, is building a supercomputer called Dojo, and if that isn’t enough, it promises to soon deliver its Cybertruck. Tesla is working diligently toward fully autonomous vehicles and what is fondly referred to as a RoboTaxi. Simply stated, Tesla has a lot going on! Don’t forget, Tesla is the THE employer of choice for best-of-breed engineering graduates as is Space X, which happens to be another Elon Musk company.
Finally, do the math, genius! If history is any indicator and if you don’t mind some risk in your portfolio then roll the dice on Tesla for its next spike. My math suggests that one can invest in what might be the next spike for Tesla stock every month and lose money, however, if it happens just once in three years, that can more than make up for thirty-five months of losses.
RISK – Trading options may result in potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the options markets. Do NOT trade with money you can’t afford to lose.