The Million Mile Battery

As we inch closer to Tesla’s “Battery Day”, will investors buy the hype and sell the upset?

By: Daniel Betancourt/ OptionsSwing Inc.

Image Credit: The Guardian

Tesla is like the Yankees of the automobile world; massive market cap, die-hard fans but even more enemies who would like to see them burn in flames. Elon Musk has been accused of “cooking” the books quarter after quarter when it comes to reporting earnings; these skeptics question the automakers profitability and sales. It boggles their minds when they see that Tesla’s market cap is larger than all the American auto makers combined.

This following Monday is a big day for both Tesla fans and skeptics.

Retail investors have been attempting to decipher every tweet that Elon sends out. They believe that Elon had hinted the stock split back when he tweeted “Tesla price is too high imo”. The time and date of that tweet, which sent the stock plunging that trading day, allegedly hinted the date of the announcement and the split rate of 5–1. Here we have Elon Musk hyping up his own event as any confident Founder would; but is the hype too much for what will actually be unveiled?

At the moment, the hype behind the battery is that it will be a “million mile” battery. By a million miles they do not mean that one charge will take you around the world a few times; it means that consumers will be able to re-charge their batteries until the car’s mileage hits the million mark before needing to be replaced. This is huge news especially since most cars never get to see the million mile mark so in other terms, this battery will last a lifetime.

But what happens if Elon Musk does not provide the “million mile” battery? If he does not provide, he will surely disappoint the market once again and cause a sell off that will possibly send the stock to sub 300. Investors really need this piece of good news that has been lingering in the market for months now to come true. For now, it is a buy the rumor and sell before the news disappoints.

Above we have Tesla Option’s open interest. As we can see, investors are betting bullish on Tesla going into battery day with 67% of Option contracts being Calls. The sentiment does turn around leading into November; but that can be the overall uncertainty coming towards election. The market is looking for some good news coming from Elon, last thing they want is Tesla dragging the Nasdaq down on disappointing news.

Let us see what Tuesday brings us.

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