Gear Up For Volatility Into Tesla's Earnings Report

Tesla TSLA will be reporting earnings after the close Wednesday, meaning traders have the opportunity to capitalize on massive volatility.

Since shares have shot up in value over the past four quarters, the price change following earnings has been 24.4 percent, 14.3 percent, negative 14.5 percent and 8.4 percent. The absolute value of these changes is 15.4 percent and the average change is 11.7 percent.

In the week following earnings, the absolute value of price change is a whopping 27.1 percent. The average is 12.64 percent. Assuming this report follows past trends, a lot of money is about to be made on the announcement.

Investors looking to play Tesla on the short side need to keep in mind that for the past year short interest on the release date has been very high and the bears only have one victory.

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With shares down more than three percent before the report, either investors are frightened by Tuesday’s misses and are selling, or shorts are once again piling in before the report.

The sales estimate of $699.1 million is only 24.4 percent higher than it was for the same quarter last year despite the share price being 271.5 percent higher. The lowest estimate is $637 million and the highest estimate is $807.6 million.

The earnings estimate for the quarter is surprisingly lower than the actual results from the same period in 2013. The low estimate gives the company a relatively easy opportunity to top its estimate. EPS is expected to come in at $0.10. Analyst estimates range from $0.40 to a $0.07 loss.

Shares crept to all time highs following last quarter’s earnings, but have pulled back 32 percent since the $260 high. The price change over the past quarter is just 7.87 percent.

Shares were last trading at $200.69, 3.18 percent lower than the issue opened.