Tesla shares have jumped 5.5%, allowing Elon Musk to reclaim his title as the world’s richest person after losing it for a while. The stock price now exceeds the previous high of $367 from May 28, boosted by positive market sentiment regarding potential interest rate cuts. There are still worries about Musk’s future earnings due to possible tax credit reductions and reputation issues. However, Musk’s strong sales skills are pushing the company into robotics initiatives.

Focus On Market Trends

Right now, the market’s attention is shifting away from earnings. The current upward trend hints at a possible return to the highs we saw in 2024. With recent gains for Oracle shares, caution is advised against short positions. As Tesla has surpassed its summer high of $367, short-term implied volatility in the options market has surged over 15% this week to almost 58%. This rise makes buying weekly calls pricier, reflecting strong bullish momentum linked to broader market optimism about interest rate cuts. Traders are willing to pay more for a chance to capitalize on a continued rise toward the highs from 2024. For those optimistic about this trend, the pattern of higher lows is encouraging and similar to the strong rally in the second quarter of 2023. Given the high option prices, we suggest using a risk-defined strategy like a call debit spread, rather than buying calls outright. For instance, purchasing the October $380/$400 call spread could allow for further gains while keeping costs down.

Considerations And Skepticism

However, we need to consider the skepticism surrounding fundamentals. The full phase-out of federal tax credits is likely to pose a 5% challenge to gross margins in the coming quarter. Given the stock’s history of rapid changes, buying long-dated puts for early 2026 could help position for potential downturns without getting trapped in a short-term spike. This strategy gives time for the fundamental factors to possibly outweigh current market sentiment. The current high volatility presents an opportunity for traders anticipating that the stock will eventually stabilize. As seen with Oracle’s surprising rise last week, major tech companies can experience large fluctuations, which is why option premiums are so elevated. We believe that selling an iron condor with strike prices safely outside the recent trading range could be a smart way to profit from time decay and expect a decline in volatility. Create your live VT Markets account and start trading now.

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