Mike Khouw's Bearish Tesla Trade

On CNBC's "Options Action", Mike Khouw shared with the viewers his options trading strategy in Tesla Inc TSLA.

The company is going to report earnings on Wednesday and Khouw wants to set up a bearish trade. He wants to buy the August 335 put for $14.90 and sell two August 310 puts for $6.20 each. The options structure is going to cost him $2.50 in total and the trade breaks even at $332.50.

Khouw could make a maximal profit of $22.50 with the trade, if the stock drops 7.48 percent to $310. If the stock drops below $310, Khouw is going to have to own it at $310. He would start to lose money below $287.50.