Tesla could make a run at new highs—here’s why: Trader

Tesla shares are surging, and according to one trader the best is yet to come.

"I think Tesla can move up to the $270 level by May," Andrew Keene said Tuesday on CNBC's "Trading Nation."

Keene's call represents a 6 percent advance from the current stock price of around $255. Tesla shares have already rallied 80 percent from their February low — driven recently by overwhelming demand and interest surrounding preorders for the company's newest Model 3.

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Despite the already sharp move higher, Keene sees no signs in the chart of Tesla that would indicate a meaningful pullback, but instead said that the stock has strong support and should continue to rev higher.

"We are in a clear bull channel," he said. Furthermore, "the options market is implying a $35 move between now and May expiration and that captures earnings in early May," added the founder of AlphaShark trading.

To calculate an implied move on a name, options traders measure a stock's so-called straddle — or at the money puts and calls. The amount of the straddle typically captures market markers' expectations for how much a stock is going to move.

To play for the move higher, Keene purchased the May 260/270 call spread for $2.50. This is a bullish strategy where a trader will buy a call and then sell a higher strike call to offset the cost. The goal is for the stock to move to the strike you are short, or in this case $270 by May expiration.

"This trade allows me to take advantage of the trend of the stock and play with the earnings catalyst," said Keene


Trades to Watch

Trader Bios


Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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