QuantumScape’s stock has risen for nine consecutive days, reaching a three-year peak at $15.03. This increase follows advancements in their Cobra separator process, paving the way for commercial launch in the next two years. The broader market saw some selling after a profitable week, with the S&P 500 up over 0.5% and the NASDAQ Composite gaining 1.4%. On Friday, the NASDAQ Composite was the only major index to rise, with a modest increase of 0.05%.

Economic Indicators

Building permits and housing starts exceeded predictions, and consumer inflation expectations dropped significantly in a Michigan survey. QuantumScape is expected to share an updated commercialization plan in its next business update. QuantumScape’s shares hit $15 for the first time since May 2022, marking a significant increase. The stock rose after the announcement of reduced production speeds for its Cobra process. The QS stock recently rebounded from the 261.8% Fibonacci retracement level at $14.06. Its next targets are $17.98 and $20.41, while support may be seen near previous levels of $7.72 and $10.14, according to Fibonacci percentages. Given the stock’s recent activity, derivative traders should brace for increased volatility. The nine-day rise has pushed implied volatility to extreme levels, with the 30-day IV recently exceeding 130%, resulting in higher options premiums. This indicates that the market is preparing for a significant move around the company’s next update.

Options Trading Strategies

For those optimistic about the upcoming commercialization plan, buying call options is a straightforward way to speculate on further gains. Traders are likely targeting strike prices near the upcoming Fibonacci resistance levels of $17.98 and $20.41, expecting positive news from the business update. These options would benefit directly if the Cobra process makes progress beyond expectations. However, it is important to consider the stock’s history, which includes a significant drop from over $130 in late 2020, highlighting its potential for sharp reversals. With short interest around 17% of the float, many traders are betting against the rally. This makes buying put options or selling call spreads a practical strategy for those anticipating a “sell the news” scenario or a pullback from the recent highs. A more cautious approach might involve using spreads to manage the high option costs. A bull call spread could capture a move towards the upper targets while limiting initial costs. Alternatively, a straddle could profit from a large price change in either direction following the announcement. This strategy allows traders to capitalize on expected volatility rather than just the direction of the stock price. The broader market, with positive data on housing and inflation, sets a supportive background for speculative growth stocks. However, this company’s short-term performance is more influenced by its specific catalysts than by the NASDAQ’s daily movements. A general market downturn could still impede the rally, regardless of company-specific news. Ultimately, the upcoming business update is the crucial event that will shape the next major trend. Current options pricing reflects significant uncertainty, and traders should align their positions with their risk tolerance leading up to this important announcement. Create your live VT Markets account and start trading now.

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