The bar for Tesla earnings is sky-high. Here's why and how options traders can capitalize

Tesla is set to report earnings, and options traders are positioning for a potentially significant move in the stock. The bar for Tesla's earnings is indeed high, given the company's history of beating expectations and the current market sentiment. With a history of volatility around earnings releases, traders are looking for ways to capitalize on the potential move.

Options traders are using strategies such as straddles and strangles to play both sides of the trade, given the uncertainty around the earnings release. These strategies involve buying calls and puts at the same strike price and expiration date, or buying out-of-the-money calls and puts, respectively. By doing so, traders can profit from a significant move in either direction, while limiting their potential losses. The key is to correctly gauge the direction and magnitude of the move.

To watch next: Tesla's earnings release and the subsequent stock move. Keep an eye on implied volatility levels, as they may surge ahead of the earnings release, making options more expensive. Also, monitor the stock's reaction to the earnings report, as a significant beat or miss could lead to a substantial move. Options traders should be prepared to adjust their positions accordingly, considering factors such as delta and gamma to manage their risk exposure.

Originally reported by cnbc.com. OptionNews adds analysis for finance & markets readers.