Tesla unlikely to drive up volatility on S&P 500, analysts say


Investors have worried that including Tesla Inc’s notoriously volatile shares within the S&P 500 will exacerbate gyrations within the broader index, but some analysts say that’s unlikely to happen.


The electric carmaker, which can join the S&P 500 on Monday after rallying nearly 700% this year. It ranks near the very best in implied volatility – or expectations for stock moves embedded in options prices – on the index.

Still, analysts say Tesla’s shares will have a minuscule effect on broader market gyrations. If Tesla had been added to the S&P 500 on Thursday, it’d have increased one-month implied volatility. Which on the benchmark index by just 0.15 points, to 17.08 from 16.93, consistent with Susquehanna.

“We don’t think it’s going to have an enormous impact,” said Christopher Murphy, Susquehanna’s co-head of derivatives strategy.

UBS strategist Stuart Kaiser concluded similarly regarding Tesla’s effect on broader S&P 500 volatility during a research note distributed last month. Had the stock been included within the S&P 500 all year, it’d have increased implied volatility. Which on the benchmark index only by 0.12 points on the average, he wrote.

Meanwhile, by some measures, Tesla’s options have shown greater calm recently.

Tesla’s 30-day implied volatility has dropped to about 82% from just under 95% last Friday. Which keeps up with data from options analytics provider Trade Alert.

Exuberance among buyers of Tesla options has also faded somewhat. Tesla’s skew has turned positive within the past week, in line with Trade Alert. This shows that speculative demand for bullish call options on the carmaker has eased up as compared to protective put options.


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