So TSLA rallies and finally has an up day today. That in itself is a surprise since TSLA just had by most accounts the worst earnings report in its history. Usually this does not mean much as Sir Musk rides to the rescue with a new shiny object to make investors happy. The SEC is coming up with a settlement but the larger issue, the near always issue, is how much financing the company will need to keep their growth going. The volatility market might give a clue.
Implied volatility is down after earnings, but not a lot
This time in the cycle after earnings IV should be lower in a stock like TSLA. Usually the 30 day implied volatility trades in the mid-40s. That is the not the case right now with TSLA 30 day IV marking closer to 51%. 8 or 9 points of volatility is not much normally but in a stock like TSLA that is a big number. That jacks up the near the money quite a bit where 2.5 vol points is another $1 in the straddle. A stock usually gets quieter with a trend after earnings but traders are still looking for a move.
Upside Call Curve is still flat
There is still very large open interest in the downside for TSLA. 100 strikes and just about anything south of 200 gets some kind of open interest. As TSLA tries to round up more financing look for the OI in those strikes, 200 and lower, to jump a bit more. Junk upside call protection with a relatively flat curve in TSLA right now and that is normal. The whipsaw in this stock can be quite fantastic so upside calls usually keep a bid longer than most stocks post-earnings. It makes upside call protection pricey for those that want to own it but makes a nice sale for those that want to finance puts.
Will TSLA see 200?
I have written on TSLA before and as a trade I think it is more interesting at inflection points. As one can see from my highly technical “hair on fire” chart, TSLA is making a recent low but the IV has not bottomed. Downside put flies could pay well as there could be more room here. The bold could finance a put fly with upside short call spreads well OTM. Spreads only in this monster.
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