Tesla options price in largest earnings swing in a year
Tesla options are pricing in a 5.8% post-earnings swing, the largest in a year, as traders balance a bullish tilt against the looming uncertainty of SpaceX's first public earnings.
Options markets are bracing for Tesla's largest post-earnings move in a year when the electric-vehicle manufacturer reports results on Wednesday. At-the-money puts and calls currently imply a 5.76% swing in either direction, surpassing the 6% move priced in last October and marking the highest expected volatility since last July.
Despite the elevated pricing, Tuesday's trading flow skewed distinctly bullish. By midday, traders had purchased 244,000 calls compared to 116,000 puts, with calls accounting for more than two-thirds of the total premium spent. The heaviest bets concentrated on 380-calls expiring Friday, where traders deployed over $15 million at roughly $11 per contract.
For those specific bullish contracts to turn a profit, Tesla shares must rise at least 3% by the end of the week. However, market professionals should note a sharp disconnect between implied and historical volatility. CBOE data shows Tesla stock has posted a median move of just 3.5% over the last four earnings seasons, suggesting options sellers may be overpricing this particular event.
For volatility traders, this divergence presents a potential opportunity. If Tesla reverts to its recent historical average, the premium currently being demanded for weekly contracts will likely look expensive in hindsight.
The heightened activity is unfolding against a complex backdrop involving Elon Musk's other venture. SpaceX, which went public in a historic June IPO, has seen its valuation retreat from an initial $2 trillion to roughly $1.7 trillion. That figure sits just ahead of Tesla's $1.4 trillion market capitalization, creating a unique capital allocation dilemma for institutional investors weighing both stocks.
The space company is set to release its first earnings as a public entity on August 4, with the options market already implying a massive 12% move. This dual dynamic is heavily influencing Tesla's near-term trading patterns.
"If you want to be aggressive you could argue [Tesla is] hanging on support and take the long side, which I am longer term, but it's more or less been rangebound since the start of the year," said Gianni Di Poce, instructor at TheoTrade. "The whole SpaceX thing is weighing on it, people are trying to figure out which to own and if they're going to merge."
