Is Aston Martin’s New Electric Car a Threat To Tesla Motors, Inc (TSLA)?

Aston Martin revealed its plans for a plug in electric version of its Rapide S supercar. Aston Martin CEO Andy Palmer announced that the car should be available in two years’ time and while it may not pose an immediate threat to Tesla Motors, it threaten to unseat them as the premier manufacturer of luxury electric vehicles. The electric Aston Martin will be priced well above the entry level Tesla model at around $200,000.

While this may only appeal to consumers that would be interested in TSLA higher end models the company also faces competition from automakers like General Motors (GM). GM has announced plans to release a longer range electric car in 2017, the same time that TSLA’s model 3 is scheduled to come out. Despite increasing compaction in both the high end and mass markets TSLA investors seem to have found some renewed optimism on the back of record breaking sales in Q1.

TSLA shares are currently trading around $210.00 in a 52 week range of $177.22-$291.42. The stock is down over 5% this year but has been rallying hard over the past month. Shares of TSLA have rallied over 10% in the past 30 days and has broken back above key technical resistance as determined by the Ichimoku Cloud. With TSLA trading at the high dollar amount that it does traders may be hesitant to invest all of the necessary capital it would take to carry a large TSLA position. However, a trader may choose to run a stock replacement strategy to get long TSLA momentum with much less risk that outright stock.

Trade: Buying the TSLA Sep 180 Calls for $41.00
Risk: $4100 per 1 lot
Reward: Unlimited
Breakeven: $221.00

This trade has a breakeven higher than the stock’s current price but with a delta of 75 these calls will have a profit and loss profile very similar to the underlying stock.