Option Market: Tesla Inc Risk Hits An Inflection Point

Tesla Inc (NASDAQ:TSLA) Risk Hits An Inflection Point

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We're going to look at a proprietary risk rating for the next 30-days built by Capital Market Laboratories (CMLviz) based on a large number of interactions of data points, many of which come directly from the option market for Tesla Inc (NASDAQ:TSLA) .

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In the "Why This Matters" section at the end of this article on Tesla Inc (NASDAQ:TSLA) we're going to take a step back and show in great specificity that there is actually a lot less "luck" in successful option trading than many people know. The whole concept of an "option trading expert" is vastly over complicated and we'll talk about how superior returns are earned.

But first, let's turn back to TSLA and the company's risk rating:

We also take a peek at the implied vol for the Consumer Discretionary ETF (XLY), our broad based proxy for TSLA.

S&P 500 IV30     9.18%
Nasdaq 100 IV30     10.55%
XLY IV30     11.79%

TSLA HV 30     24.14%
TSLA Current IV30     40.85%
52 Week Low IV30     27.76%
52 Week High IV30     92.07%

The risk as reflected by the option market has hit an inflection point relative to the company's past. The option market reflects a 95% confidence interval stock price range of ($234.10, $282.30) within the next 30 calendar days.

The IV30® is the risk reflected by the option market in the stock price for the next 30 calendar days -- it's forward looking. Tesla Inc shows an IV30 of 40.9%, which is an inflection point for the company relative to its past.

The option market for TSLA has shown an IV30 annual low of 27.8% and an annual high of 92.1%, meaning that TSLA is at the 20% percentile right now. Here's a table of the data before we dig into the risk rating further.

Current IV30    
Low IV30    
High IV30   
40.9% 27.8% 92.1%

The option market reflects less risk in the next 30 calendar days for Tesla Inc (NASDAQ:TSLA) than on average.
Further, if we look backwards, the stock has a realized 30-day historical volatility, called the HV30, of 24.14%.

We have an unusual situation now where the IV30 is depressed relative to the past, but even with that risk pricing, the option market reflects the likelihood of a greater stock movement in the next 30-days than the stock has realized in the last 30-days. Let's turn to a chart to see what's going on.
Note how much higher the forward looking risk for Tesla Inc is priced (40.9%) compared to what happened just in the last 30-days (24.1%).

Tesla Inc Risk Rating
The TSLA risk rating is at 3, where the rating goes from one (the lowest risk) to five (the highest risk). The driving factors for the 3 rating are:

The IV30 is below the annual average.
The IV30 is above 40%.
The HV30 is below the 20th percentile.
The HV30 is below 30%.
The IV30 is above the HV30.
The stock has moved +32.5% over the last 3-months which does indicate some elevated risk.