Tesla stock price to shake by 8%-10%? Use option strategies to protect yourself
The options market suggests that Tesla's stock price will rise or fall by about 8% to 10% after the financial report is released. In the past eight quarters, Tesla's stock price has risen four times and fallen four times, with an average increase or decrease of about 6.5%.
Tesla's first-quarter earnings report will be released after the US stock market closes on Wednesday, and performance often has a significant impact on stock prices. Therefore, for investors, the risk is high, but using stock options can help alleviate tension.
In a research report on Tuesday, Susquehanna analyst Christopher Jacobson detailed how Tesla shareholders can use so-called collar strategies to obtain "low-cost mid-term protection."
In the past eight quarterly reports, Tesla's stock price has risen four times and fallen four times, with an average increase or decrease of about 6.5%.
The options market suggests that after the financial report is released, Tesla's stock price will rise or fall by about 8% to 10%.
Will Tesla's stock price shake?
It makes sense to seek protection. Because the probability of predicting whether the expected return will exceed or fall below is not much better than flipping a coin.
Tesla began to significantly reduce prices in January, and the expected earnings for the first quarter decreased by about 18% compared with three months ago.
In the past year, the only quarter with a greater downward revision was the second quarter of 2022.
FactSet data shows that Wall Street expects Tesla's revenue to be $23.7 billion, with earnings per share of about 85 cents. A year ago, Tesla's revenue was $18.8 billion, with earnings per share of $1.07.
Analysts expect the first-quarter automotive gross margin to be slightly higher than 20%, lower than about 25% in the fourth quarter of 2022 and more than 30% in the first quarter of 2022.
A profit margin of more than 20% is important for investors, and management's comments on the profit margin for the rest of this year are also important.
Introduction to collar option strategy
The collar option strategy, also known as a protective call option strategy, is a strategy that combines call options and put options. The purpose of this strategy is to protect the investment portfolio from the impact of market fluctuations while still being able to profit from market gains.
Specifically, the collar option strategy includes the following steps:
- Hold a certain number of stocks or stock funds.
- Buy a corresponding number of put options to protect the investment portfolio from market declines.
- At the same time, sell a corresponding number of call options to obtain insurance premiums and limit the investment portfolio's gains when the market rises.
Through this strategy, investors can control the risk and return of the investment portfolio to a certain extent.
He recommends buying Tesla put options with an exercise price of $150, which will expire in September, and selling call options with an exercise price of $240, which will also expire in the same month.
It is believed that in this case, the decline is limited to about 19% because the put option allows the holder to sell at a price of $150. The increase is limited to about 30%. Those who hold call options can buy Tesla stock at a price of $240. The cost of buying put options is about $10, but the profit from selling call options is roughly the same.
