Tesla’s (NASDAQ:TSLA) recent meteoric stock rise—116.7% since its Q3 2024 earnings report on October 23—has ignited debates in the financial world. While many attribute the rally to external factors like President-elect Trump’s victory and Elon Musk’s proximity to the new administration, GLG Research analyst Gordon Johnson questions whether the surge is fundamentally driven or influenced by market dynamics, specifically an options gamma squeeze.

Options Market: The Unseen Driver
Johnson highlights that Tesla’s stock movement appears increasingly disconnected from company fundamentals. Instead, he suggests that activity in the options market, fueled by instruments such as weekly and 0DTE options offered by CBOE Global Markets Inc., is significantly impacting Tesla’s price trajectory.
The Role of Call Options
Following Tesla’s Q3 earnings and the U.S. election results, demand for Tesla call options surged dramatically. This shift forced market makers to hedge their risk by purchasing Tesla stock, driving the underlying price higher—a phenomenon known as a gamma squeeze.
Historical Trends
Since 2020, Tesla’s put option volumes have consistently outpaced call option volumes at a 4:1 ratio. However, the recent spike in call option demand signals a market sentiment shift, amplifying Tesla’s stock performance.
For a deeper dive into Tesla’s market dynamics, analysts can utilize the Technical (Williams %R) API to assess momentum trends and determine if the recent rally aligns with technical indicators.

Volatility and Risks
The sustainability of Tesla’s surge remains uncertain. Johnson points to Tesla’s 1-month 25-delta call option implied volatility, which stands at 71.4961%, indicating that options trading is becoming increasingly expensive.
Cost Implications
The elevated costs of trading these options may deter retail investors and hedge funds, potentially curbing the stock’s momentum. Furthermore, the reliance on short-term options activity rather than company growth raises concerns about the rally’s durability.
For investors seeking insights into Tesla’s valuation and broader market performance, tools like the Key Metrics (TTM) API provide essential metrics on operational trends and financial stability.

Fundamental Context: Tesla’s Q3 Performance
While the focus has shifted to options activity, it’s worth noting that Tesla’s Q3 2024 results were slightly better than expected. However, these results alone do not justify a 116.7% stock surge.
Key highlights include:

Strong deliveries but ongoing margin pressures.
Expansion into new markets, supported by favorable political conditions under the incoming administration.

The Road Ahead
Tesla’s stock rally underscores the growing influence of the options market in equity price movements. While external factors and improved sentiment have played a role, the data suggests that short-term options dynamics are the primary driver of Tesla’s recent gains.
Investors should approach Tesla’s stock with caution, keeping an eye on both its fundamental performance and the evolving dynamics of the options market. As volatility remains high, Tesla’s stock could face significant price swings in the near future.