Tesla Earnings
Tesla reported earnings on Tuesday, April 23rd, after making a new low after a new low on the year. This created a situation where everyone (me included) has been bearish on the stock. Last week, I posted a YouTube video about how I shorted Tesla using a bearish butterfly for the move heading into earnings. So, you may know that I was indeed bearish on Tesla and may be confused as to why I’m now posting a video with a bullish trade that I took.
That’s because, in a volatile market, it’s important to be able to shift gears and follow what the charts are telling you.
Three Different Trades
It’s also important to differentiate between pre-, earnings, and post-earnings trades. Frequently, I will be bearish pre-earnings, then place a neutral trade over the report or actually place a bullish trade. This is because when sentiment gets too slanted to one side or the other, countertrend trades can work out very well. In the case of Tesla, before earnings, everyone was just so bearish that it made sense to add a bullish trade.
Trading it Both Ways
Since the technicals were telling me bearish, but wisdom was telling me bullish, I actually traded this earnings report both ways. I placed low-cost, out-of-the-money butterflies at critical target zones.
When you do this, one side is going to lose money. Ideally, not both sides, but it can happen if the ticker doesn’t move at all or if it moves far too outside of the expected ranges!
In this case, my bearish trade lost money, but I got a 295% winner on the bullish side, which made up for the loss on the other side and more.
Check out the video below to learn more about my earnings butterfly strategy!
If you want to join me in the Simpler Central trading room, where I walk through my earnings trades live, click on this link!
