Tesla Inc (NASDAQ:TSLA) Risk Hits A Weakened LevelDate Published: 2017-03-27
Risk Malaise Alert -- Not How You Might Think:
Before we dive into any analysis we simply note that Tesla Inc (NASDAQ:TSLA) risk is actually priced pretty low by the option market as of right now. We'll detail it below -- but that's the lede -- the option market is reflecting a sort of risk malaise, for now, an IV30 of 32.42% verus the IV30 of the S&P 500 at 11.1%. The annual high for Tesla Inc IV30 is 57.87% -- and we're below that level. The alert here is low vol.
One thing to note beyond the risk malaise alert, which we cover in the article, is that while implied volatility may be low, the real question that needs to be answered for option sellers is not if the impled vol is low, but rather if the realized volatility that is coming in the next 30 days will be lower than the option market is pricing.
To skip ahead of this risk alert and see if buying or selling options has been a winner in Tesla Inc, you can go here: Geting serious about option trading.
This is a proprietary risk rating and risk alert system that looks forward for the next month -- or really 30 days to be exact -- and that includes weekends. The system is based on multiple interactions of data points, many of which come directly from the option market for Tesla Inc (NASDAQ:TSLA) . The creator of this model is Capital Market Laboratories (CMLviz.com).
Option trading isn't about luck -- this four minute video will change your trading life forever: Option Trading and Truth
In the "Why This Matters" section at the end of this article on Tesla Inc 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||11.1%|
|Nasdaq 100 IV30||11.51%|
|TSLA HV 30||38.38%|
|TSLA Current IV30||32.42%|
|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 ($241.50, $280.20) 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 32.4%, 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 15% percentile right now. Here's a table of the data before we dig into the risk rating further.
The implied stock swing risk from the option market is significantly tighter in the next 30 calendar days for Tesla Inc (NASDAQ:TSLA) than it has been on average for the year.
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.
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 above the annual average.
↪ The IV30 is below the HV30.
↪ The stock has moved +22.3% over the last 3-months which does indicate some elevated risk.