Looking at how options markets are treating Tesla stock can give investors some idea of what kind of volatility to expect after the company posts third-quarter earnings results.
Stock options give investors the right to buy or sell stocks for a specific price at a fixed point in the future. Buying a call option gives the holder the right to buy a stock in the future. It’s a bullish bet: The buyer hopes the stock rises so they can end up buying shares at the lower price embedded in the option. Buying a put option does the opposite: It gives the investor the right to sell a stock at a fixed price down the road. That works out if share prices fall.
Currently, call and put options pricing implies Tesla shares will move about 6% up or down after earnings.