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Tesla's Bulls Should Listen To What This Bear Has To Say Ahead Of Earnings

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Tesla's Bulls Should Listen To What This Bear Has To Say Ahead Of Earnings

Apple Inc. (NASDAQ: AAPL)'s earnings has come and gone, which means many traders and investors can now move on to the next major stock scheduled to report earnings this week: Tesla Inc (NASDAQ: TSLA).

Heading into Tesla's earnings report Wednesday, the stock is up nearly 50 percent since the start of 2017. However, this doesn't mean there is a guaranteed upside ahead, Todd Gordon of TradingAnalysis.com said during a recent CNBC "Trading Nation" segment. Traders and investors need to react to "what you see, not what you think, and certainly not what you hope."

In other words, investors who think or hope that the sky is the limit for Tesla's stock need to readjust their approach, he explained. Tesla's stock is dangerously low to its "support" line of around $318 per share — not a good indication. Meanwhile, implied volatility in the stock is on the rise, and Tesla's earnings report could result in an "explosive" move.

The options market is in fact pricing in a more than 6-percent move in either direction, or $22 per share. As such, long-term investors, like Gordon, may want to consider hedging their position to limit the impact of any decline.

Specifically, Gordon suggests selling the weekly August 4 $335-strike call and simultaneously buy the August 4 weekly $340-strike call, which creates a credit of $125 per option.

"We're selling a call credit spread above the expected move [of 6 percent]," he explained. "So by way of options math, you could say that the market has approximately an 80 percent chance of being below $340 post-earnings."

Related Links:

Tesla Investors Fret On Meeting Delivery Targets Ahead Of Q2

Earnings Scheduled For August 2, 2017

Latest Ratings for TSLA

DateFirmActionFromTo
Oct 2019DowngradesMarket OutperformMarket Perform
Sep 2019Initiates Coverage OnBuy
Jul 2019ReiteratesUnderweight

View More Analyst Ratings for TSLA
View the Latest Analyst Ratings

Posted-In: Analyst Color Earnings News Previews Travel Analyst Ratings Tech Media Best of Benzinga

 

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