Options traders bet Tesla’s earnings report will add $75 billion to the stock’s market cap

Tesla speeds into Wednesday afternoon’s earnings report having added more than $142 billion to its market cap since it last reported on April 29.

Some options traders are betting that the electric automaker can add another $75 billion to that number by the end of this week.

The stock price has doubled during that period, and has soared by nearly 275% in 2020. Tesla would have to bounce another 25% out of earnings to complete that market cap move by Friday, but options traders are more than willing to bet that Elon Musk’s company is more than capable of doing exactly that.



“We saw call volume outpace put volume today by [a ratio of] about 2 to 1. Most of that was very short-dated. Right now, the options market is implying a move of about 14% by the end of the week,” Optimize Advisors CIO Michael Khouw said Tuesday on CNBC’s “Fast Money.”

While options contract pricing in Tesla may be implying a move of 14% in either direction, the most popular strike in Tuesday’s session were actually those that required a 25% move higher just to break even.

“Most of that activity was concentrated in the weekly 2,000-strike calls,” said Khouw. “Almost 20,000 of those traded for around about $25 [per contract]. Buyers of those calls are obviously betting that the stock could go above that $2,000 strike price by the end of the week.”

While these traders are confident in Tesla completing this mammoth move higher in such a short period of time, the overall options market is less certain of the stock’s ability to get it done. According to Khouw, the market is predicting only a 14% chance that these contracts end up being profitable. 

Tesla was trading 1% higher Wednesday morning. 

Disclaimer


Originally published on CNBC

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