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How Not to Buy the Dip in Tesla (or Anything Else)

‘Why would I invest in a basket of dinosaurs?’ one die-hard says of other big U.S. stocks
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Tesla Weekly Chart 2023-01-20

Please consider Tesla Is Last Stronghold for Investors Buying the Dip in Tech Stocks

Tesla shares dropped 65% in 2022, their worst year on record. Facebook parent Meta Platforms Inc. sank 64%, and Netflix Inc. declined 51%. But tech and other growth stocks have rebounded to start the new year, buoyed by hopes that the Fed will slow its pace of rate increases. The S&P 500 has edged up 3.2% in January.

Abhas Gupta, a 41-year-old entrepreneur in Irvine, Calif., said he moved his whole equity portfolio into Tesla shares in 2018, enamored by its electric cars and promise of disruptive innovation. Last year, he lost his entire seven-figure retirement fund after taking out margin loans and using options to turbocharge his bets on Tesla, he said. Still, he said he is far from calling it quits.

“I basically burned a lifetime’s worth of wealth, but none of this has shaken my confidence in the company. There is just no company even remotely close to Tesla on innovation,” Mr. Gupta said.

“Why would I invest in a basket of dinosaurs?” he said of the S&P 500.

Mr. Gupta said he is aggressively buying long-dated call options on Tesla. Call options give traders the right, though not the obligation, to buy shares at a stated price by a certain date, while put options grant the right to sell.

Overall, options volume in Tesla has grown in the past few months, according to Cboe Global Markets. One of the largest options bets on Tesla is that shares will reach $825 in the next three years; the stock closed at $133.42 per share Friday.

2018 to 2021 Tesla Top

  • Gupta put his entire portfolio into Tesla in 2018. 
  • The range for the year was $11.80 to $25.83. 
  • Tesla peaked at $414.50
  • From $11.80 to the top, Gupta was up 3,413 percent
  • From $25.83 to the top, Gupta was up 1,505 percent

He lost every penny, buying the dip on margin. His largest position now is a bet that Tesla will reach $825 in three years.

If Tesla soars to $800, that won't be good enough. He will lose every penny. Instead. if he bought shares outright at $110, and shares get to $800, he would make 627%. 

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Apparently, that's just not good enough. 

My guess is that he loses it all on those options. 

This post originated at MishTalk.Com.

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