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Wednesday, February 21, 2024

Tesla stock options priced for smaller-than-usual move after earnings

Tesla stock options priced for smaller-than-usual move after earnings


Traders in Tesla Inc. stock options have prepared for less volatility than usual following the release of the electric-vehicle maker’s third-quarter results after Wednesday’s closing bell.

An options strategy known as a straddle is priced for the stock
TSLA,
-4.14%

to move $13.66 — 5.6% at current stock prices — in either direction on Thursday, according to data provided by Matt Amberson, principal at Option Research & Technology Services.

Don’t miss: Tesla earnings: What to expect from the EV maker

A straddle is a pure play on volatility that involves the simultaneous buying of both bearish (puts) and bullish (calls) options, with strike prices at current levels. The straddles in question expire at the end of the week.

With Tesla’s stock recently down 4.1% at $244.44 in afternoon trading, the straddle’s pricing means a buyer of the straddle would start making money if the stock falls below $230.78 or rises above $258.10.

That’s below the average price move after the past 12 quarterly reports of $16.03, or 6.6% at current prices.

Over the past five quarterly reports, however, the average stock move was much higher at 9.4%, with moves ranging from down 6.6% the day after third-quarter 2022 results to up 11% the day after fourth-quarter 2022 results.

Tesla is expected to report third-quarter earnings per share of 73 cents and revenue of $24.2 billion.

The stock has lost 16.7% over the past three months but has soared 98.4% year to date. In comparison, the S&P 500
SPX
has slipped 4.9% in the past three months and gained 12.8% this year.



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