Option Strategy For Tesla Motors Inc (TSLA) Ahead Of Earnings

Tesla Motors Inc (NASDAQ:TSLA) is scheduled to report its third-quarter earnings after the market today. However, ahead of the earnings, CNBC’s Dan Nathan took a look at the option market prediction on the stock. He also spoke on how Tesla’s CEO, Elon Musk, tweeted about record sales when the media was wondering whether demand for their electric cars was cooling.

“A couple of weeks ago you remember when the stock was down 6% and a Wall Street Journal article stating maybe the demand wasn’t high for their cars or the electric cars. Because they were offering certain incentives and Elon Musk the next day tweeted something about record sales, and the stock was up 10%. That sort of movement in a very short period of time is what jacks option prices…. […],” he said.

Nathan also talked about the movement of the implied moment in option market. He said that it was 8% for this quarter and average moment has been 9% over last four quarters. He explained how a trader would gain if he bought At the money call option weekly straddle of call and put option would cost together $21, Nathan cited that for the strategy to be profitable, the stock has to trade above $258.50 or at least below $216.50 to breakeven.

“You may want to think about some protection heading in if you are long. Or for those who are looking for a break of that momentum indicator, option prices, while expensive, can get a pretty good earn out if you get the direction right”, said Nathan.

Tesla Motors Inc (NASDAQ:TSLA)’s third-quarter earnings come at a time when the company continues to receive positive reviews for its cars. Its flagship car, Model S, recently received the highest safety rating of 5-star in Europe, according to the European New Car Assessment Program.

With that achievement, Tesla Motors Inc (NASDAQ:TSLA)’s Model S becomes one of the few cars that have earned such a high safety rating from European New Car Assessment Program and the U.S.

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