Options Traders Chime in on Tesla Stock Ahead of Earnings

TSLA stock has a history of negative earnings reactions

Deputy Editor
Apr 22, 2021 at 1:26 PM
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Tesla Inc (NASDAQ:TSLA) was last seen down 1.4% at $731.79, amid U.S. congressional inquiries into the automobile's autopilot safety concerns. What's more, the 2020 darling is gearing up to step into the earnings confessional, set to report first-quarter results after the close on Monday, April 26. Ahead of the event, let's dive into the mythical meme stock's recent earnings history and options activity. 

A look back at TSLA's past eight reports shows five negative post-earnings reactions, including a 3.3% drop back in January. The security has averaged a post-earnings swing of 7.2%, regardless of direction and this time around, the options market is pricing in a slightly bigger-than-usual move of 9.4%. 

The options pits have been leaning  bullish over the last two weeks. This is per the security's 10-day call/put volume ratio of 1.67 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which sits higher than 72% of readings from the past year. This means calls are being picked up at a faster-than-usual clip. Echoing this, TSLA'S Schaeffer's put/call open interest ratio (SOIR) stands higher than just 8% of readings in its annual range, meaning short-term traders have rarely been more call-biased.  

Today's options trading shows a similar penchant for calls. The two most popular contracts are the weekly 4/23 750- and 800-strike calls, with new positions being opened at both. This implies options traders are optimistic about potential upside for the stock by the time these contracts expire tomorrow, and new positions are being opened at both.

Even with earnings looming, now seems like a great opportunity to weigh in on TSLA's next move with options. The equity's Schaeffer's Volatility Index (SVI) of 63% stands in the 14th percentile of all other readings from the past year. This suggests options players are pricing in lower-than-usual volatility expectations at the moment. What's more, the security's Schaeffer's Volatility Scorecard (SVS) sits at 96 out of 100, indicating Tesla stock has exceeded volatility expectations during the past 12 months -- a boon for options buyers.

 
 

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