Tesla Stock Racing Higher After Fifth-Straight Profit Beat

Options traders are flocking toward TSLA today

Deputy Editor
Oct 22, 2020 at 10:33 AM
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The shares of Tesla Inc (NASDAQ:TSLA) are moving higher this morning, after the electric car company reported adjusted fiscal third-quarter earnings of 76 cents on $8.77 billion in revenue, both of which easily beat Wall Street's estimates. This marks five consecutive quarterly reports of profits for Tesla. In addition, the Elon Musk-led company reported record 139,300 vehicle deliveries. As a result, the shares of Tesla stock were last seen up 3.7% to trade at $438.20.

In response, three analysts chimed in with price-target hikes, including to $419 from $377 at Canaccord Genuity. Coming into today, six out of 19 covering TSLA considered it a "strong buy," with the remaining 13 calling the stock a "hold" or worse. Meanwhile, Tesla stock's 12-month consensus price target of $332.97 is a 24.6% discount to current levels. 

When we last checked in on Tesla, we showed that the equity had pulled back to a historically bullish trendline. We noted that when TSLA pulls back to its 40-day moving average, it had a 50% chance to rise 5.9% over the next month, and its already popped over 7% since brushing with the trendline at the $408 level. Longer term, the security is up 425.9% in 2020. 

Calls are popular in the options pits, per NFLX's 50-day call/put volume ratio of 1.73 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio ranks in the 99th percentile of the stock's annual range, suggesting there is a healthier-than-usual appetite for long calls of late. 

Today, options players are piling on from both sides of the fence. In the first hour of trading, over 178,000 calls and 115,000 puts have exchanged hands -- double the intraday average and volume pacing in the 99th percentile of the last 12 months. New positions are being opened at the weekly 10/23 450-strike call.

The good news for options traders is that premium can be had for a bargain thanks to a volatility crush. The security's Schaeffer's Volatility Index (SVI) of 75% sits in the 8th percentile of its annual range, meaning options players are pricing in relatively low volatility expectations right now. Plus, TSLA's Schaeffer's Volatility Scorecard (SVS) stands at 96 out of a possible 100, meaning the security has tended to make outsized moves over the last year, compared to what the options market had priced in -- a potential boon to premium buyers.


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