Options Traders Are Betting On a Historic Earnings Move For Tesla Stock

Tesla options open interest is muted before earnings

Feb 6, 2018 at 11:25 AM
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Following in the footsteps of fellow automakers General Motors (GM) and Toyota Motor (TM), Tesla Inc (NASDAQ:TSLA) is scheduled to report earnings after the close tomorrow, Feb. 7, and while the stock has a history of big one-day post-earnings swings, volatility expectations are even higher than normal this time around. For example, TSLA shares have averaged a single-session move of 4.7% after earnings, going back eight quarters, including a 6.8% swing last quarter. This time around, at-the-money implied volatility (IV) data is pricing in a post-earnings swing of 10.5% -- which would easily be the biggest one-day after-earnings move over the past two years. 

With the equity last seen trading near $330 a share, an upside move of this magnitude would put it near $367 -- territory not explored since September. The stock is currently testing the rising 50-day moving average, as well as a trendline connecting higher lows in recent months. And while TSLA has pulled back since a Sept. 18 record high of $389.61, it has a year-over-year lead of almost 28%.

tsla stock price

Checking in on other data points, total open interest on Tesla ranks in just the 11th annual percentile at the moment. The 30-day IV skew, meanwhile, comes in at 12.9%, putting it just 2 percentage points from an annual high. This tells us premium for puts is much higher than normal, relative to their call counterparts.

And even with the elevated volatility expectations, options traders shouldn't shy away from TSLA. That's because the security has regularly exceed volatility expectations over the past 12 months, based on its Schaeffer's Volatility Scorecard (SVS) of 71.


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