Why Tesla could surge to new highs on earnings

Why Tesla could surge to new highs on earnings
Why Tesla could surge to new highs on earnings

Tesla shares have been on fire, and traders are betting the stock could go even higher after its earnings report.

The options market is implying a 6 percent move in either direction when Tesla reports after the bell Wednesday, which is more than the average move of 5 percent. There is "mostly bullish sentiment – about 20 percent more bullish bets," surrounding the stock, Mike Khouw of Optimize Advisors said Tuesday on CNBC's "Fast Money."

The stock has been on a tear since the election, surging more than 40 percent and gaining more than $15 billion in market cap.

"[Options prices have] gotten cheaper interestingly, and that's just because the stock hasn't done much on earnings lately," Khouw said. "If you were to try to reach and press a bullish bet, wouldn't it make more sense to use the options and spend $2, $3 than reach out for the stock and pay $280?"

Khouw noted that the most active buying activity was the Feb. 24 weekly 300-calls for about $2.20. This means that traders see Tesla closing above $302.20 by Friday. That puts the stock above its previous all-time high of $291.42 set in September 2014.

Tesla is scheduled to release fiscal fourth-quarter earnings Wednesday after the closing bell. Analysts polled by FactSet are expecting the company report a loss of 53 cents per share on $2.2 billion in revenue.

Shares of the automaker were down slightly at $275.28 in midafternoon trading Wednesday.


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