Tesla’s Q2 earnings report reveals that the company is starting production on a new, affordable electric vehicle. While details like the name, features, and starting price are not yet available, mass production is expected to begin in the second half of 2025. This new model will be priced lower than the Model 3, which currently starts at $42,490. In addition, Tesla plans to ramp up production of the Tesla Semi and the autonomous Cybercab robotaxi by 2026. The Q2 financial results show a revenue of $22.5 billion, down 12% from last year. Net income also dropped 16% to $1.2 billion, and vehicle deliveries fell by 13.5% compared to the same quarter last year. Sales may be affected by CEO Elon Musk’s political views, which have led to some consumer backlash. Tesla has launched a limited robotaxi service in Austin, Texas, with safety riders on board. The company aims to expand this service to other cities with low costs and eventually operate the robotaxis without onboard safety drivers. The next few months will be crucial as Tesla rolls out its more affordable EV and pursues its plans for autonomous vehicles. The recent report highlights a clear challenge for derivative traders. With a 12% drop in revenue and a 13.5% decrease in vehicle deliveries, there is a strong case for bearish sentiment in the short term. These figures suggest that short-dated put options might be a smart choice as negative momentum continues. On the other hand, the announcement of a more affordable vehicle that will enter production sets a promising long-term narrative. Traders optimistic about this goal for 2025 might consider buying long-dated call options to benefit from potential stock price increases as the new model approaches mass production. Currently, Tesla’s implied volatility is high, around 55%, indicating that the market is expecting significant price fluctuations. However, we need to consider Tesla’s history of missing production deadlines, as shown by the Cybertruck’s delays. This execution risk makes the 2025 and 2026 goals speculative, offering a chance for bearish positions. Traders could set up bear call spreads to profit if the stock stagnates or declines due to possible setbacks. External pressures are also significant, especially with growing competition in China. Rivals like BYD sold over 300,000 battery-electric vehicles in the first quarter of 2024. Consumer sentiment is a concern too; a Caliber survey indicated that Tesla’s “consideration score” among U.S. car buyers dropped to 31% early this year from 70% in 2021. These challenges, influenced by the CEO’s public remarks, might continue to hurt sales. Given these conflicting dynamics, strategies that take advantage of volatility—rather than betting on a specific direction—seem wise. A long strangle strategy, which involves buying both an out-of-the-money call and put option, would allow traders to profit from significant price movements. This approach is well-suited for the critical 12-18 months ahead as the market weighs current struggles against future potential.

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