BY ANDREW GIOVINAZZI
October 24, 2024
Yo Pit Crazies,
Yes Tesla Inc (Ticker: TSLA) had earnings on Wednesday. They were very good with the stock up $25 as I write this. Yes we had a trade in the Trading Desk that should make us some dough, maybe 40% return by the open. But really the question is if the Tesla Earnings was a special situation?
Most of the day the Invesco QQQ Trust (Ticker: QQQ) was in the ashcan. Maybe rates, maybe the next Trump Bombshell, maybe the BRICS countries setting up a rival to the dollar, maybe the deficit spiraling out of control. Anyone of them could tank the market but all seem to hit on one day.
And the QQQ managed down 10 points or almost 2%. For this market that is something. SPX was only down 1% if that. What does this have to do with a Special Situation? Stocks going down on bad news is not special, it is normal.
The TSLA earnings had something special.
It is something traders can use on any stock in an earnings cycle. If they know how to use it.
So do you want to know how to use it?
The Implied Volatilities were just a “normal price”
Normally the IVs get pumped up because there is an event. The Black Scholes model does not like pricing one event because it was meant for longer time periods. So liquidity providers juice up the option prices around the event by increasing the volatility in their models and voila, higher option prices.
What I thought was the real opportunity was the election and the earnings for the price of one. Two events for one. Musk is hooking his wagon to the Trump caravan and a win for DJT should be good for TSLA.
It looks like the idea will work with a real shot at a homerun with triple digit gains.
If you want more on a special situation and how to trade it, check this out.
To Your Trading Success,
AG
Andrew Giovinazzi
30-Year Trading Pro
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