TSLA election play

I usually don't like taking bets of 50/50, and the election polls pointed to a very tight race.

So I looked for a better R:R idea. I choose TSLA because everyone knows that Elon Musk supports Trump and that he might get a role in his administration which can't hurt TSLA.

TSLA stock was trying to breakout the 270$ resistance for many weeks now.

On NOV 1st TSLA traded around 250$ and a spread of long the Call 260 and short Call 270 was trading for 2$. This seemed like a good R:R (paying 2 to earn 8 at 270 or above).  

(I wanted to do a spread because the volatility was high before the election and the options premium was expensive).

So I took a small bet and did 2 spreads (risking 400$ to make 1600$ above 270).

Then, on Nov 4th TSLA stock kept on moving down. While I don't average down with trades that go against me, I decide to make an exception and add 1 more C260 (without selling another Call 270) as it was trading only for 260$ and it seemed to be too good R:R to miss out, and because my initial risk was very small and I added a very small risk. So now my total risk was now 660$ (400$ from the spread and 260$ from the long naked call).

Once Trump is announced as the winner, TSLA stock sky-rocked to 287$.

The spread was almost 10$, and the naked option that cost 260$ was worth 2700$.

Risked 660$ and up 4000$ for a 6R winner. (4R on the spread and 9R on the naked call).

The lesson here is that sometimes you can find a small risk & good reward ideas, using options, at binary events.

Next day update:

Keeps going up and the 1 naked call is now 3700 or 13R.

At expiration date:

Going straight up another 10% to 327$. Yesterday I locked-in gains with put 285$ so it won't reverse on me. The put expired worthless but helped me stay in the trade and to let my profits run.

The naked call which cost 2.6$ is now 66.8$ meaning 25R trade.

Cheers

Dani