The Next Big Trade Is Tesla's October "Triple Whammy"

Now that the Fed's meeting and first rate cut are done and dusted, traders are looking for that next big catalyst to create a bullish thesis, perhaps even outside the AI space.

With three major events coming up in early October, and bullish momentum, one stock in particular has caught my eye.

Here's how to trade it…

One of the tickers that has caught my eye after the Fed decision is TSLA, which is up 11% since then, compare to the SPY which is up only about +5% (chart below).

$TSLA 1hr (candles) vs $SPY (red line) 1

Some of this extra volatility shouldn't come as a surprise since TSLA is more volatile than the SPY, the world's largest index. However, one cannot help but notice SPY is still below the spike highs (~572.25) from before the Fed decision, whereas TSLA has continued to make new monthly highs, even through yesterday's session.

I think this is due to traders buying in anticipation of TSLA's key Q2 earnings (10/16), the company's robo-taxi event (10/10), and its Q2 deliveries report (10/2). This slate of events are giving traders plenty of reasons to acquire trades that benefit from higher volatility in TSLA before the Q2 deliveries release.

If those come out gangster, then we'll likely see follow-up buying in anticipation of the Q2 earnings and robo-taxi event. If, however, they don't dress to impress, then we'll likely see the recent ramp in share price post-Fed to falter a bit, while hoping for a revolutionary robo-taxi event.

While we can debate the impact of the robo-taxi event (substance vs actual deliverables with no sightings of Tesla taxi's out in the world thus far), I think the Q2 deliveries and earnings will set the major tone for the stock until the October options expiration.

With that being said, looking at my PFP system (Positioning, Flows and Price Action), price action has been trending upward post-Fed with two ‘corrective' pullbacks since. These ‘corrective' pullbacks while producing impulsive moves to the upside tells me the bulls are maintaining control with the two pullbacks being profit taking and position adjusting.

$TSLA 1hr chart

From a flow perspective, Monday produced a solid amount of call buying and put selling, which is exactly what you need for a strong bull move. As I'm writing this on Tuesday, traders are selling calls after the big run and buying puts (which I  suspect is the short puts from yesterday closing via long puts). Regardless, the strength of buying on Monday is more vigorous than Tuesday's selling. So from a flow perspective, I like the idea of buying dips.

In terms of positioning, while there is room to make it up to $260, the TCS (top call strike) is at 250, so stalling here is not surprising. What is interesting is I'm seeing a solid uptick in calls at the 300 strike, which tells me the medium term bulls for October, November and December are targeting 300 should the events on deck come out bullish.

Traders who are bullish on TSLA may want to look at 300 calls for 1-3 months out, or perhaps call spreads in this ‘moonshot' bullish play for the October events.

Meanwhile, traders who are bearish should wait till just before the Q2 deliveries (10/2) before establishing bearish positions. In this scenario, I'd suggest looking at long out-of-the-money (OTM) bear put spreads targeting 240 and below for the October or November options expiration.

I'll update my Trading Waves members with my trade ideas just before the events, but October should provide a lot of forward guidance and directional cues, perhaps for the rest of the year. Click here to see how to join Trading Waves and get my best trade ideas as soon as I have them.

Photo by Hans Eiskonen on Unsplash