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Option Market: Tesla Inc Risk Hits A Weakened Level




Tesla Inc (NASDAQ:TSLA) Risk Hits A Weakened Level

Date Published:

PREFACE
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.





SNAPSHOT SUMMARY
S&P 500 IV30     9.31%
Nasdaq 100 IV30     9.74%
XLY IV30     9.9%

TSLA HV 30     33.17%
TSLA Current IV30     31.73%
52 Week Low IV30     27.76%
52 Week High IV30     57.87%


The risk as reflected by the option market has hit a weakened level relative to the company's past. The option market reflects a 95% confidence interval stock price range of ($226.00, $261.40) within the next 30 calendar days.

While the option market risk rating is on the low side, we note that companies in this situation are still susceptible to sudden stock move risk, it's simply the probability of that large stock move is depressed. Buyers of options and volatility may find these prices more attractive than at other times.

TSLA OPTION MARKET RISK
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 31.7%, which is a weakened level 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 57.9%, meaning that TSLA is at the 13% percentile right now. Here's a table of the data before we dig into the risk rating further.

TSLA
Current IV30    
TSLA
Low IV30    
TSLA
High IV30   
31.7% 27.8% 57.9%

The option market reflects substanially 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 33.17%.




We have a situation now where the IV30 is substantially depressed relative to the past resulting in a risk pricing of less stock movement in the next 30-days than the stock has see in the last 30-days. Let's turn to a chart to see what's going on.
 
Note how similar the forward risk for Tesla Inc is priced (31.7%) compared to what happened just in the last 30-days (33.2%).

Tesla Inc Risk Rating
The TSLA risk rating is at 2.5, where the rating goes from one (the lowest risk) to five (the highest risk). The driving factors for the 2.5 rating are:

The IV30 is below the 20th percentile.
The HV30 is below the annual average.
The stock has moved +26.8% over the last 3-months which does indicate some elevated risk.