To The Moon

There have some hype around Tesla is going to unveiling the much-awaited Cybertruck. Investors are looking forward and doubters are shown Tesla’s halo effect.

$Tesla Motors(TSLA)$ stock was up 4.5% on 28 Nov (Tuesday), this might be a chance to look at how Tesla have fared on the option trading side as well.

Top 3 Daily Stock Option

Tesla came in Top with a total option volume of 2.243 million, with a call options volume higher than put options volume.

What is interesting would be the IVX 30 day, which is above 40 at 41.89, this normally mean it is heading north when expecting a launch or events.

Tesla (TSLA) IV Percentile Rank

TSLA implied volatility (IV) is 40.7, which is in the 1% percentile rank. This means that 1% of the time the IV was lower in the last year than the current level. The current IV (40.7) is -8.7% below its 20 day moving average (44.6) indicating implied volatility is trending lower.

Tesla (TSLA) IV vs 20-Day HV

The current IV (40.7) in TSLA is -17.7% below its 20 day HV (49.5) suggesting that options markets are predicting future volatility to trade below the most recent 20 day realized volatility.

Tesla (TSLA) Volatility Skew

The current skew indicator show a slightly bullish signal. The implied volatility skew shows the market's bias for pricing in volatility risk to the option premium of downside puts and upside calls.

The implied volatility for downside puts is decreasing relative to upside calls, then that suggests the market is pricing in positivity to a upside move.

Tesla (TSLA) Call Spread Benchmark Index (30-Day Maturity, ATM to +5%)

TSLA Call Spread Benchmark Index (30-Day Maturity, ATM to +5%) is unchanged today at 2.0% premium to stock price. This value is below its 52-week average premium of 2.1%.

The TSLA Call Spread Benchmark Index is designed to track the theoretical cost of buying an at-the-money call and selling an out-of-the-money call 5% above the spot price for options with 30 days to maturity.

How I Would Trade Using Debit Call Spread Strategy

Currently, Tesla last close price as of 28 Nov 2023 is $246.72, I will be using this contract that expiration date is 10 days away on 08 Dec 2023, I will make one leg to buy a call on the $250 strike for $6.10.

I will add another leg - sell a call at $255 strike for $4.15.

The initial cost of the Debit Call strategy would be $1.95 ($6.10-$4.15). In order for me to make a profit from this strategy, the stock price would need to move higher than $251.95 which is calculated from long strike ($250) plus cost of the spread ($1.95).

My maximum gain would be realized if the stock moves above the $255 strike. Hence, my call spread would be worth $5 and my cost was $1.95. This will net me a profit of $3.05.

Summary

I would be expecting Tesla to trade higher with the anticipation of the Cybertruck release, there should be pre-order building up. This effect should last for at least 2 weeks, this is why I am putting a 10-day period options instead of longer.

The debit call spread is better as it help to lower my risks in case the reception to Tesla’s Cybertruck is not well received, there might be a small move of its share price.

I will still be monitoring how Tesla is trading on 29 Nov 2023.

Appreciate if you could share your thoughts in the comment section whether you think Tesla would be benefitting from the anticipation of the Cybertruck.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.