Undoubtedly, Tesla is a major focus of the market this week!

Since the beginning of the year, Tesla's stock price has been like a roller coaster. From January to February, due to sluggish car sales, declining gross margin, intensified competition in the Chinese market, and controversial political involvement of Musk, the stock price dropped by about 30%, falling from nearly $400 to under $300.

In March and April, the stock price fluctuated at a low level, followed by a violent rebound in May and June, mainly driven by its autonomous taxi pilot program, growth in its energy business, and the AI concept. Entering July, the stock price once again started a fluctuating pattern.

Tesla's stock price is notoriously difficult to navigate, as it is largely influenced by the company's fundamentals, and the constantly changing narratives and concept shifts also significantly drive its stock price. Of course, factors such as Musk's fluctuating political presence and his changing relationship with Trump are also affecting it.

In summary: Tesla's cars are selling slower and slower, the story keeps getting bigger, the stock price drops along with sales reality, but is pulled up by the AI dream, and political factors and personal relationship dynamics are also influencing the stock price, resulting in dramatic ups and downs.

What new catalysts will the Q2 results, which will be announced post-market on Wednesday, bring to the stock price? How can investors see through the underlying factors of the rise and fall and seize opportunities? Let's discuss these questions below.

Ask Futubull AI: Look for information regarding Tesla's earnings outlook.

To answer the previous questions, an important first step is information gathering. Understanding the existing crucial information will enable better investment decisions, and this step can be assisted by Futubull AI.

Futubull AI can identify important information and directly provide you with summarized points.Click here.You can also directly access the AI response page with one click:

By clicking the number behind the text of the answer, you can find the corresponding product functions or content pages, and then you can click to view the details, for example, the following two articles (Click link 1.、Link 2., you can also directly access the article detail page.

Based on this information, further summarization, reflection, and processing will be done.

At this critical juncture, Tesla's performance is still crucial for the stock price trend. Let's first look at the market expectations for the financial data, with the median expectation of revenue at $22.9 billion, which is a decrease of 10% compared to the same period last year; EPS is $0.43, a decrease of 20% year-on-year.

The difference between market expectations and actual performance is a significant factor affecting the stock price. If the actual performance exceeds expectations, it will lead to bullish sentiment; conversely, it will exert pressure on the short-term stock price trend, which is the first point to pay attention to.

From a specific business perspective, it is not enough to only look at whether selling cars is profitable; more attention should be paid to new ventures like the Robotaxi autonomous taxi and Optimus robotics that Musk is promoting, as well as whether the new energy storage business is reliable and profitable. These factors determine whether Tesla's stock price can continue to soar. If the future story is well told, the stock price can hold steady or even rise; if it flops or if car sales are really poor, the stock price may drop.

In the automotive business, Q2 delivery volume was 0.3841 million vehicles, which sold less than last year, with the Model 3/Y being the mainstay, while the expensive Cybertruck has not sold well. Additionally, as car sales have decreased, there is an ongoing price war, so it is necessary to focus on whether Q2 car sales' gross margin can stabilize or improve, and what the management has to say about sales for the second half of the year and next year...

Speaking of Robotaxi, this is currently the focus of Tesla's 'promising future' narrative. Although the Robotaxi pilot in Austin has started, it has encountered some initial issues. Just shouting slogans is not enough; this performance and the conference will determine whether Musk can clearly explain when Robotaxi can be scaled up and become profitable. If this 'pie' breaks, the stock price might take a hit. Attention can also be given to the FSD payment rate, which is currently at 27%; if it rises further, there could be potential for the stock price.

Additionally, for the Optimus robotics business and the energy storage business, good news would be even better.

Regarding Optimus, there have been recent reports that production has been paused, and the person in charge has left. It will depend on how management explains this situation. Moreover, if the conference reveals a concrete path to mass production in the coming years, it could uplift market sentiment and boost the stock price. In terms of the energy storage business, Q1 revenue surged by 67%, so attention should be given to whether this can continue into Q2.

So, there are still many potential catalysts affecting the stock price regarding this earnings release.

Regarding the future market, there are also significant discrepancies in stock price expectations. Bulls believe in Tesla's future narrative, trusting its positioning as an 'AI + Energy Platform' with a target price of $500 and above. Bears focus more on practical realities, considering the negative impacts of tariffs and subsidy reductions, the trend of Cars gradually becoming unsellable, and the current issue of overvaluation, expecting stock prices to be between $115 and $215.

The current implied volatility (IV) of options exceeds 60%, which is higher than the historical volatility (HV). IV can be understood as the market's expectation of future stock price volatility, while HV reflects the actual price fluctuations over the past period. An IV greater than HV indicates that the market expects future stock price movements to become larger. In terms of options, it is also betting that the single-day price change after the earnings release could reach approximately 7%. To elaborate, in the past 16 quarters, there have been 10 instances where the price volatility post-earnings release exceeded expectations, so there is a considerable possibility that this time the volatility will surpass 7%.

In summary, the focus of this earnings report can be simplified to: Cars need to be stable, dreams need to be realized, and keep an eye on volatility.

Second question for Futubull AI: Predicting stock price movements after Tesla's earnings.

Although we have already mentioned most of the important information above, regarding stock price expectations and more detailed situations reflecting stock price expectations such as Unusual Options Activity, perhaps Futubull AI can assist us again.

There are several points worth considering in the information provided by Futubull AI:

The market has a certain medium to long-term bullish outlook through options, but the strike prices being bet on are not too high, with $340 being a key level.

Currently, there is considerable divergence between bulls and bears, and the market's expectation of daily stock price fluctuations post-earnings (around 7%) may be underestimated, meaning the actual volatility could be even greater.

AI also points out an important knowledge point: IV may quickly decline after the earnings release. This actually supports a commonly used options strategy for earnings, which is to short IV on the day of the earnings report or one day prior, hoping to profit from the decline in IV. If released after market hours, then do it on the day of the release; if released before market hours, then do it one day before the release.

To explain simply: IV is the market's expectation of the range of future stock price fluctuations. If the IV is 30%, it indicates that the market expects stock prices to rise and fall within a range of 30% in the near future.

Option prices are positively correlated with IV. Generally, all other conditions being equal, the higher the IV, the more expensive the options. Thus, a strategy composed entirely of selling options typically aims to take advantage of declining IV. Common strategies for shorting IV include selling Single Options, Short Straddle, and Short Butterfly.

For Tesla, if based on a slightly bullish market and the expectation of increased volatility, the strategy of a one-sided short IV with Put, namely Short Put, might carry less risk of failure. Of course, there are other possibilities and adaptable strategies, but to keep the following content more focused and helpful for everyone, further introduction will first be provided for the Short Put strategy.

Strategy details: Short Put harvests high IV premiums.

If you have never traded options, let's briefly understand what Short Put is and what purpose this strategy is usually based on.

First, it's important to know that Put refers to a Put option. If you Long Put and buy a Put option, it means you have to pay an option premium upfront. After purchasing, you have the right to sell a specified number of target stocks at an agreed strike price within the specified time. When stock prices decline, under other unchanged conditions, the option price usually decreases as well, so Long Put is generally based on the premise that the stock price will fall. However, it is necessary to note that if IV rises, even if the stock price declines, the Put price may also increase, which is a risk point.

In contrast, Short Put means that by selling Put options, you initially receive a premium. If the stock price falls below the strike price of the option and the buyer exercises it, you have an obligation to buy the agreed number of target stocks at the specified strike price. To prevent yourself from being executed without sufficient funds, this strategy requires a significant margin at the outset. This strategy is usually made based on the belief that the stock price will not fall below the strike price or that you are willing to buy the stock at the strike price.

For more information, everyone can refer to the following chart:

Now, returning to Tesla, we will discuss step by step. Note: The following example is for educational purposes only and does not constitute any investment advice.

1. When to operate?

Since Tesla's performance will be released after Post-Market Trading on the 23rd, the best time to short IV before the performance is during the trading session on the 23rd.

2. Which strike price and expiration date to choose for the Put?

Since the main goal is to harvest IV from the decline in the period before and after the earnings release (also known as IV Crush), the closer the expiration date, the better, to avoid prolonged risks. From the Options Chain, the closest expiration date for Tesla is currently July 25.

As for the strike price? If there is no intention to buy Tesla at the opportunity, it is best to leave a safe distance. For example, if you expect that the stock price will not fluctuate more than 12% before the expiration date, you can leave about a 12% price distance. If calculated based on the current price of 332 dollars, deducting the 12% downward space, the Put strike price can be set at 292 dollars.

If you are willing to buy Tesla at the strike price, then that price will serve as your target Buy price. If the stock price drops below the strike price, you can not only earn the options premium but also successfully buy Tesla.

3. How much money can be obtained? How much money needs to be prepared?

Assuming you plan to Sell 1 Tesla Put with an expiration date of July 25 and a strike price of $292.5, at a price of $1.12, you would need to obtain $1.12 X 100 shares = $112, subtracting about $2.5 in fees, leaving $109.5.

How much margin is required? Click on this Put, then click the 'Trade' button. You can see that the required initial margin is about $2,355 by accessing the icon next to the 'Sell' button on the lower page. In the 'Short Selling' area above this label, you can also see how many contracts you can short based on your current account funds.

4. How will IV and stock prices change after the earnings release?

Before looking at different scenarios and responses, we need to understand how much IV can decrease after the earnings release.

Through the path of Market > Options > Earnings Opportunities, it can be seen that after the last earnings release, Tesla's IV Crush was 14.73%. If we calculate based on this value, as of the market open on the 23rd, the IV of this Put is 111.56%, and if it drops to about 14%, it would be 96.83%.

At this point, we can use the 'Option Price Calculator' on this Put details page to estimate the option price at that time. Setting the IV to 96.83%, theoretically when the stock price drops to $325, the price of this Put would be similar to when you sold it. However, the actual IV after the earnings release may vary, and even if the IV is the same, the price calculated by the calculator may not entirely match the actual price.

5. Next, let's discuss the different stock price situations and responses after the earnings release.

Assuming everything mentioned before holds true, then at the market opening on the 24th:

1) If the stock price does not fall below $325, the market price of the options at that time will not be higher than your selling price.

In this case, your mindset will be relatively stable. However, there is still some time until the expiration date, and some uncertainty remains.

If you are concerned about this uncertainty, you can choose to Buy this Put to close your position, and at this point, you will basically not incur losses.

If you are not too worried about this uncertainty and believe that it is unlikely to fall below $292.5 at expiration, you can also choose to wait for the options to expire.

2) If the stock price is between $292.5 and $325, the market price of the options will be higher than your selling price, but it has not yet reached the exercise price.

If the market price of the options differs significantly from the selling price, closing the position at this point may result in a larger loss.

If held until expiration, there is a certain possibility that the stock price will not fall below the strike price until expiration, resulting in a profit; however, there is also a possibility that the stock price will fall below the strike price before or at expiration, in which case you may be required to buy Tesla.

Even if required to buy Tesla, the stock may rebound during the holding period, but if the option is closed to cut losses, the lost money will be permanently lost.

If the market price of the option is similar to the selling price, then it can be chosen to close the position, accepting a small loss for peace of mind, or one can choose to wait until expiration, trading some time for a potential opportunity.

3) If the stock price falls below $292.5, the likelihood of being exercised becomes high. In this case, closing this option due to larger losses would not be cost-effective. As mentioned above, holding until expiration may allow trading some time for future possibilities.

Additionally, if you choose to wait until expiration and are ultimately exercised at a price of $292.5, you will need to pay $29,250 to buy 100 shares of Tesla. However, since you received $109.5 in premiums earlier, your effective purchase price is $291.405. Whether you make a profit in the future will depend on whether Tesla's stock price can rise above $291.405.

6. Lastly, a reminder about the risks.

All of the above simulations are for educational purposes only and do not represent any investment advice. Moreover, all simulation processes are theoretical and may differ from actual situations.

The above primarily discusses the strategy of using Short Put to harvest IV premium, but in reality, IV may not move in the expected direction, or the downward movement may not meet your expectation; the stock price may also completely deviate from your prediction. If the stock price declines significantly, the losses from Short Put could also be substantial.

Investing carries risks, especially in Options Trading. Decisions should be made cautiously after considering one's risk tolerance, investment goals, financial situation, and market changes.

Alright, that's it for today. If you have any thoughts on Futubull AI, Tesla, and options, feel free to Share. Looking forward to seeing your insights!

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