Key Takeaways:
Susquehanna recommends buying Tesla Inc. (TSLA) options, noting that the 35% standard deviation in analyst price targets suggests a wider range of potential outcomes than the options market is currently pricing in.
"The Street implies a much wider range of potential outcomes when it comes to Tesla’s stock price," Susquehanna derivatives analyst Christopher Jacobson said in a report Monday.
Jacobson points to the average analyst price target of approximately $408, which carries a 35% standard deviation. This compares to a deviation of just 10% to 16% for the other Magnificent Seven stocks, highlighting the significant uncertainty surrounding Tesla's future, including its ventures in artificial intelligence and robotics.
Tesla shares have fallen 13% this year as investors await progress on new ventures. Owning options provides a way to profit from the wide disagreement among analysts, which could lead to significant stock swings on future news.
The analysis from Susquehanna highlights that while Tesla's stock has been range-bound, the underlying division among analysts creates an opportunity in the derivatives market. Options prices are influenced by volatility, and Jacobson's report suggests that the implied volatility in Tesla options has not fully caught up to the uncertainty reflected in Wall Street's price targets.
An option gives the holder the right, but not the obligation, to buy or sell a stock at a predetermined price in the future. Their value can increase if the underlying stock becomes more volatile, regardless of the direction of the price move. However, options carry significant risk and can expire worthless.
Tesla stock closed up 0.4% at $392.56 on Monday, while the S&P 500 fell 0.4%. Despite being down 13% year-to-date, the stock has risen 36% over the past 12 months.
The report suggests investors could see gains if future catalysts cause the stock to swing widely, aligning with the high deviation in analyst forecasts. The market will now watch to see if this analysis drives an increase in options volume and implied volatility for Tesla ahead of its next major product or AI announcement.
This article is for informational purposes only and does not constitute investment advice.
