Stocks: Big Swing in Tesla Shares Is Projected After Earnings -- WSJ
January 29 2020 - 3:02AM
Dow Jones News
By Gunjan Banerji
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (January 29, 2020).
Tesla Inc.'s rally has been marked by big swings up and down.
That pattern is expected to continue after the auto maker reports
results Wednesday afternoon.
Options traders are forecasting as much as an 11.1% move in
Tesla's shares over the two sessions following its earnings report.
That is a bigger swing than the average 9.5% move over the past
eight quarters, according to data provider Trade Alert.
The projections are based on an options trade called a straddle,
which entails acquiring both bullish and bearish options contracts
that allow investors to buy or sell stock at a specific price. The
trade doesn't measure the direction of the swing, just the
size.
As Tesla's stock has rallied to records, options have been
changing hands at a frenzied pace. The auto maker just logged an
eight-week winning streak, gaining 71% through Friday, the best
performance during such a period since 2013. As the stock ascended,
options volume jumped to a five-year high, and bullish options have
been particularly popular in recent days.
In October, Tesla delivered a surprise quarterly profit that
energized its stock price. Chief Executive Elon Musk also fulfilled
his promise of boosting production and delivering at least 360,000
electric vehicles in 2019. Analysts will now parse the earnings
results to see how deliveries in the fourth quarter affected the
company's bottom line.
The stock rally -- making Tesla the biggest-ever U.S. auto maker
by market value -- has invigorated a debate over the company's
prospects.
The recent options activity reflects the dramatically different
views investors tend to take on the company's share price.
Some popular options trades have recently included bearish put
options that would pay out if Tesla shares drop to less than half
their current level and hit $200 over the next year, as well as
bullish call options tied to a rally to as high as $1,015, Trade
Alert data show.
Call options give investors the right to buy shares at a
specific price later. Put options confer the right to sell.
Stock analysts have recently increased the outlooks for the
company's shares, saying they could hit $600 or $612, at least a
5.8% jump from Tuesday's closing level.
Tesla shares rose $8.88, or 1.6%, to $566.90 on Tuesday.
Write to Gunjan Banerji at Gunjan.Banerji@wsj.com
(END) Dow Jones Newswires
January 29, 2020 02:47 ET (07:47 GMT)
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