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How TSLA Earnings Date Impacted Options Traders


Over the last few years, Tesla used to report earnings during the first week of the second month of the earnings cycle (February, May, August and November). This cycle was expected to be no different. However, yesterday Tesla surprised the trading community and announced that they will report earnings on Thursday, July 31. What does it mean for the options traders?

Prior to the announcement, the options market assumed that the TSLA earnings will be as usual, during the week of August 8. The options chain reflected those expectations as we can see from the following chart:

 

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After the announcement, the August week1 IV increased by 20% to reflect the new TSLA earnings date:

 

2b71c4b069b67bf9fc3da3733bf681ff.png

And now to a little quiz: who benefited from the announcement and who was hurt?

 

Well, if you were trading earnings options long, the August w1 straddle, you made over 50% in one day of holding.

 

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But if you were long a calendar spread (long August week1, short July week4), you made a whopping 200% by trading TSLA earnings options:

 

4f4966c8a1898af71c6e455e4c3aac63.png

 

Ever wondered how all the insiders make their fortunes?

 

Want to learn more how we trade earnings in our SteadyOptions portfolio?

 

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We want to hear from you!


Kim,

 

Could there be a strategy there? Meaning, could we open a trade before earnings dates are release to profit from this volatility change?

 

Thanks!

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Sure... but let me clarify... do you see any volatility change before and after earnings dates are confirmed?

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If the confirmed date is the same as "expected" by the options market, then IV change will be minimal. If it's different, then it will be substantial since the markets have to reprice the options based on the new information.

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Since you don't know before ...

 

If you were short a calendar spread then you had made a losing trade 

 

I rather look to the delta and think in probabilities.

 

Chris 

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