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You don’t need to look far to understand the animus against Tesla (TSLA). Recently, the electric vehicle manufacturer disclosed a 13% drop in first-quarter 2025 deliveries, spiking anxieties among investors about the enterprise’s forward trajectory — and particularly that of the underlying security. Once a high-flying name on Wall Street, TSLA stock is now staring at a more than 40% loss on a year-to-date basis.
Unfortunately, the poor deliveries represent just one of the flashpoints facing the EV maker. Over the years, Tesla has repeatedly slashed its prices across its entire vehicle lineup to defend its market share. Of course, every action has a reaction. In this case, the pricing initiative pushed automotive gross margins (ex-credits) down into the low teens, well below the 20% to 30% gross margins it used to command.
On a related note, rising global competition is clearly hurting or at least challenging the brand in a way that Tesla is simply not used to. In prior market cycles, the company utterly dominated the EV segment. Now, legacy brands along with Chinese competitors have closed the innovation gap fast. It also doesn’t help that new entries offer fresh alternatives to Tesla’s now-ubiquitous (read unoriginal) design language.
But the big headwind, naturally, is the man himself, Elon Musk. At first, his renegade personality brought a certain charm to the Tesla brand. However, with such a strong pivot toward President Donald Trump and the overall conservative movement, Musk’s behaviors represent a liability.
After all, liberals also buy EVs. If I had to guess, I would imagine that they would be more inclined to be EV customers, what with zero emissions and all.
Still, there’s a price for everything — and TSLA stock may have finally hit the sweet spot.
Taking the Path of Least Resistance with TSLA Stock
Technically, there may be a decent chance that TSLA stock initiates some positive momentum from here. Ever since the equity fell to the low $200 range in early March, it has formed a support baseline. Granted, it hasn’t made what I would term blistering upside performances. At the same time, it is holding the fort down.
Shares could still tumble from here based on the troubles cited earlier. Nevertheless, there’s also reason for the bulls to have confidence, especially because the bad news is already priced in. Essentially, when negativity becomes consensus, the risk-reward framework flips:
- Institutions have already rebalanced. Funds have already cut their exposure, so the overhang is lighter now.
- Retail fatigue is high. When the most ardent bulls have lost their appetite, it’s possible that the bottom is in.
- Short interest has risen. No, a short squeeze isn’t on the horizon but elevated short interest could help accelerate a potential rally.
It’s at this point where some speculators may decide to buy far out-the-money (OTM) calls in anticipation of a recovery. However, a smarter idea may be to consider a parallax-compressed trade.
Parallax error in optical systems refers to a distortion effect between perceived alignment and actual alignment. In the financial market, an equivalent error may stem from misjudging the magnitude component of a security’s three-dimensional forecasting problem. Stated differently, it’s not enough to have confidence in the direction and time of the movement; magnitude also matters, especially with OTM calls.
Therefore, an alternative approach is to consider trades that compress this parallax so that you’re only dealing with direction and time, not magnitude. Suddenly, a three-dimensional problem becomes a simple rise-over-run exercise.
Parallax Compression for a Big Payout
Traders seeking a quick scalp may want to set their sights on the 237.50/240 bull call spread expiring April 25. This transaction involves buying the $237.50 call (at an ask of $1,480) and simultaneously selling the $240 call (at a bid of $1,335), resulting in a net debit paid of $145, the most that can be lost in the trade.
Should TSLA stock rise through the short strike price at expiration, the maximum reward is $105, or a payout of 72.41%. Of course, Thursday saw shares close at $241.38, meaning that technically, this is a risk-inverted trade. TSLA can actually fall slightly and still collect the max payout.
But the most important takeaway is that with this trading setup, you only have to calculate the probability of TSLA stock rising over a one-week period, without considering the magnitude. Based on the past six years, these odds are around 53% to 54%, aligning with the bull spread’s probability of profit (PoP).
However, the PoP measures the likelihood of breaking even. Since TSLA can actually dip a little and still be fully profitable, this spread appears favorably mispriced as well.
