Will Tesla Stock Rise After Earnings? What Options Markets Are Predicting.
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Brace for volatility in Tesla stock after the company reports earnings.
Stock options can help investors prepare for the reaction to earnings reports. A call option allows a holder to buy shares of a company at a fixed price in the future. A put option does something similar, but a holder has the right to sell shares for a fixed price.
An option's value is tied to how volatile a stock is, how long the option has left to expiration, the difference between the price embedded in the option—called the strike price—and where shares are trading.
Looking at options with strike prices close to current stock prices and expiring close to when earnings are reported gives investors a sense of what traders believe is a likely reaction to an earnings report.
For Tesla, current options pricing implies shares will move roughly 9%, up or down, following earnings. That is in line with recent reactions to Tesla's earnings. Shares have moved an average of 11% over the past four quarterly reports. They have risen once and fallen three times over that span.
