Traders are woefully unprepared for one of Tesla’s biggest events of the year

Just three weeks away from Tesla‘s second-quarter earnings report, investors are looking shockingly complacent.

You’d think they’d know better.

Over the past eight quarters, Tesla has seen a median move of 5% on earnings. Options traders, however, are pricing in just a 2.5% fluctuation this time around, according to data compiled by Goldman Sachs. That’s the biggest underpricing out of the firm’s entire options universe for companies reporting before August 4.

That 2.5% implied move is even more surprising when you consider recent, non-earnings-related fluctuations in the stock. Tesla has swung by an average of 2.2% a day over the past month, on an absolute basis.

This is notable because earnings reports have historically stirred up outsize price swings for companies across the stock market, yet Tesla traders don’t seem prepared for anything more than the usual daily action.

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Tesla has the smallest implied earnings move in Goldman’s stock universe, relative to fluctuations on past reports.
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Goldman Sachs

Tesla’s share price has experienced considerable volatility over the past few weeks, stemming mostly from pessimistic commentary about its growth prospects. On July 5, Goldman Sachs analysts cut the firm’s price target on the company, citing a lack of upside in demand for the Model S sedan and the Model X SUV.

The Elon Musk-led tech titan also experienced weakness around that time after falling short of the highest crash-test rating by the Insurance Institute for Highway Safety. But the company has also seen its stock spike on positive news, like on Tuesday, when it announced it was expanding its service capacity.

Still, the stock is down by roughly 15% since hitting a record high on June 23.

So why does investor positioning even matter at this point, with Tesla’s earnings report still three weeks away? For one, it’s entirely routine for traders to try to get ahead of earnings-related moves in the weeks, even months, before reports. It can be a smart move, because positions can get crowded and more expensive as the date nears.

And this type of positioning is happening elsewhere. Goldman highlights Synchrony Financial and Express Scripts as the two companies seeing the largest differences between past earnings moves and the price swing expected in the next couple of weeks.

Tesla

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Markets Insider