Chart of the Day – Tesla (TSLA)

by riskreversal January 24, 2017 3:49 pm • Trade Ideas

After a fairly rocky 2016 for Tesla (TSLA), despite the unveiling the future of the company (the mass market model 3 to be delivered in 2018 in volume), shares have been on a tear since December 2nd, up 41%, and up 18.5% in a little more than 3 weeks in 2017.

Today’s gains in the stock place it above the downtrend that has been in place since its all time highs made in Sept 2014:

TSLA 3yr chart from Bloomberg

Aside from the stock’s V bottom last February that saw the stock trade nearly $140, the $180 – $200 range has served as very healthy technical support dating back to mid 2013:

TSLA 5yr chart from Bloomberg

The stock’s gains are fairly curious given the lack of news and the very strong likelihood that the higher the stock goes, the increased chance of a capital raise.  The next identifiable catalyst for TSLA will be their Q4 results due in mid Feb (yet to be confirmed). Short dated options prices are well below their 52 week, year ago highs, with 30 day at the money implied volatility (blue line below) at 40%, down considerably from 90% last February, but at one of its widest gaps to realized volatility (how much the stock is moving, white line below), possibly making it expensive for those looking to express long premium directional views or buy protection:


With Q4 earnings estimated to be Feb 15th (not yet confirmed), the options market is implying about a 7.5% move between now and the Feb 17th expiration close. That might seem a tad rich if one were just focused on the earnings event as the stock has not been particularly volatile over the last 4 qtrs, averaging only a 3.25% move the day after. One reason for this might be the company’s policy of releasing the prior quarter’s car deliveries, which they did on Jan 3rd, which missed prior guidance.  The slow trickle of news reduces the potential surprises at a previously scheduled event like an earnings conference call. That means that selling options that isolate the earnings week, and using that premium collected to help finance a farther out option (a call or put calendar, depending on directional intent) could be the way to go.

We’ll circle back on the name between now and the earnings event.