Tesla's stock is bouncing. Here's what the options market says you should do.

By Lawrence G. McMillan

Target, Walmart and Home Depot are the focuses of earnings reports next week, and options traders are eyeing these trades

Here’s what the options market is saying you should do with Tesla’s stock, and as Target and Walmart report earnings next week.

While the pace of earnings releases continues to be slow, there are still some high-profile companies due to report results next week that have often led to oversized post-earnings moves in their stocks: Alibaba Group Holding, Deere, Home Depot, Target and Walmart, to name a few.

And there are different ways investors can profit from these stocks through stock options.

But even outside of earnings, there are some stocks shown below, such as that of Tesla (TSLA), in which particular developments in the options market make them attractive new bets.

But starting with the earnings reporters, the accompanying two-year chart of Target’s stock (TGT) shows the stock price on the bottom and implied volatility on the upper graph. One can see that implied volatility increases into a spike and then plunges, creating a sawtooth pattern.

These implied volatility increases occur as the earnings date approaches. Then implied volatility plunges after the earnings are announced. It is actually something of an optical illusion, as the options are not getting more expensive as the earnings date approaches; but they are remaining the same price. That is, the option trading “universe” prices the straddle prior to the earnings and more or less keeps it at that price until the earnings are announced.

An option that doesn’t lose value to time decay (which these don’t over the couple of weeks heading into the earnings) thus has the appearance of increasing implied volatility. So, every week when we publish the list of potential post-earnings moves, they are stocks with sawtooth pattern surrounding past earnings dates.

The following table shows the stocks that are reporting earnings next week. This list normally is comprised of stocks whose options have increased implied volatility. That is, the option market is expecting a potentially volatile move after the earnings news.

Our approach is to attempt to buy the shortest-term straddle possible (generally the one expiring on the Friday after the earnings-reporting date) and exit at the close of the first full day of trading after earnings have been reported. For the stocks listed in this table, that would mean buying the straddles expiring on Aug. 21, or the next nearest date if that expiration date doesn’t exist for a particular stock.

 
Date        Time  Symbol   Cost   OptVol 
 8/18/2026   AM     AS    5.55%    3,058 
 8/18/2026   AM     HD    1.23%   11,692 
 8/19/2026   AM    TGT    6.33%   27,494 
 8/19/2026   AM    TJX    1.78%    4,515 
 8/19/2026   PM    BILL   11.07%   2,934 
 8/20/2026   AM    AAP    8.03%    4,496 
 8/20/2026   AM    BABA   6.01%   111,525 
 8/20/2026   AM     DE    5.22%    1,299 
 8/20/2026   AM    WMT    4.49%   90,749 

Date: The earnings reporting date. Time: Whether earnings are released AM – before the open – or PM – after the close. Symbol: Ticker symbol. Cost: Price of the straddle expressed as a percentage of the underlying stock price. OptVol: The 20-day average of total option volume.

Stock-market insight: S&P 500 trying for an upside breakout

The stock market, as measured by the S&P 500 index SPX has been consolidating after finally having broken out to new all-time highs. It has been in a tight trading range between 7,700 and 7,800 for several days.

Each day, it seems that an upside breakout is possible, but it still hasn’t broken out. Still, we expect an upside breakout here. There is strong support near 7,600 (the old highs, where there is also a gap – circled on the accompanying SPX chart), and there is no classic resistance above 7,800 because that is all-time high territory.

Equity-only put-call ratios are slowly drifting downward. But the standard ratio is near enough to its recent high that the computer analysis programs are not grading it as a buy signal.

Regardless, if it doesn’t exceed the recent highs in two more days, that will be a buy signal by definition. The weighted ratio is already on a buy signal.

Breadth has been modestly positive, but more in “stocks only” terms than in the New York Stock Exchange’s terms.

The NYSE breadth oscillator remains on a sell signal. Meanwhile, cumulative volume breadth figures (the daily running total of volume on advancing issues minus volume on declining issues) reached new all-time highs, both in terms of NYSE data and “stocks only” data, which is a very positive sign for the market.

What has been happening is that the big-cap artificial intelligence-related stocks have been doing well on a lot of volume, which has helped the cumulative volume figures, even though overall breadth hasn’t been great. In terms of cumulative volume breadth, both “stocks only” totals reached new all-time highs yesterday, so that is a bullish sign.

New 52-week highs expanded again, and this indicator remains bullish on the stock market. There was one day this week when new highs only outnumbered new lows by one issues, but things have improved since then. This buy signal will remain in place until new lows on the NYSE are greater than new highs for two consecutive days.

The Cboe Volatility Index VIX has been dropping as the S&P 500 has been climbing, as expected. Some feel that VIX should even be lower, but traders are protecting their portfolios by buying S&P 500 puts and that keeps VIX a bit inflated. In any case, VIX dropped to the lowest closing price since mid-January this week. That keeps the trend of VIX pointed downward, which is bullish for stocks.

The construct of volatility derivatives remains very bullish for stocks as well. That is the term structures of the VIX futures and of the Cboe volatility indexes are sloping strongly upwards. Moreover, the VIX futures are trading at larger premiums to the current price of VIX.

So, the S&P 500’s chart is bullish, but we are not getting the agreement from internal indicators that we’d like to see. Regardless, we are looking for the S&P 500 to break upward out of this tight trading range and to move some of the stubbornly non-conforming internal indicators into confirmed buy signals. Meanwhile, continue to roll deeply in-the-money options where appropriate.

New Recommendation: Tesla’s stock

The recent selling in Tesla’s stock (TSLA) produced a large negative bout of pessimism – as reflecting in a very high put-call ratio. That has rolled over to a confirmed buy signal now, and we want to take action because this put-call ratio signal is coming from about the same point that the one did this past April and that saw the stock rally nicely. Because TSLA options are so expensive, we are going to use a call bull spread for this position:

Call bull spread in Tesla stock: Buy 1 TSLA (Sep. 18) $335 call and Sell 1 TSLA (Sep. 18) $385 call. Tesla’s stock closed Thursday at $339.96. While it has dropped 24.4% in 2026, it has bounced 14% since hitting a one-year low on July 29.

As usual, we will hold as long as the weighted put-call ratio remains on its original signal.

New Recommendation: Silver ETF

A few weeks ago, there was a put-call ratio buy signal in the iShares Silver Trust ETF SLV, but we were a bit leery because of the steep downtrend in the price of the metal (and of the ETF). However, there has been consolidation and now an upside breakout over resistance in the $56 area. That is enough to turn us bullish on silver, so we want to buy the SLV ETF.

Buy 3 SLV (Sep. 18) $59 calls.

Initially set a trailing closing stop at $50 for these calls.

Follow-up action:

All stops are mental closing stops unless otherwise noted.

Long 1 BNS (Sep. 18) $85 call: the trailing closing stop for Bank of Nova Scotia’s stock (BNS) remains at $85.50 for the calls.

Long 2 RTX (Aug. 21) $225 calls: we will hold as long as the weighted put-call ratio for RTX (RTX) remains on a buy signal. RTX’s stock traded at $225 this past week, so these calls were rolled up.

Long 2 IR (Aug. 21) $90 calls: will hold as long as the weighted put-call ratio for IR remains on a buy signal. These calls were rolled up when Ingersoll Rand’s stock (IR) traded at $90 on August 5.

Long 1 SPY (Aug. 28) $772 call and short 1 SPY (Aug. 28) $797 call: The position will be held until new lows outnumber new highs on the NYSE for two consecutive days.

Long 1 SPY (Aug. 28) $772 call and short 1 SPY (Aug. 28) $797 call: This is the trend of VIX VIX buy signal. Stop yourself out if VIX closes above 19 for two days in a row.

Long 1 VRNS (Aug. 21) $45 calls: Continue to hold without a stop, as the takeover rumors persist for Varonis Systems (VRNS).

Buy 2 ALLE (Aug. 21) $170 calls: We will hold these calls as long as the weighted put-call ratio for Allegion remains on a buy signal. Allegion’s stock (ALLE) traded at $170, so these calls were rolled up again.

Long 2 UVIX (Aug. 21) $95 calls: Hold without a stop for now.

Long 1 JKHY (Aug. 21) $155 call: As usual, we will hold this call as long as the weighted put-call ratio for Jack Henry remains on a buy signal. These calls were rolled up when Jack Henry’s stock (JKHY) traded at $155.

Long 6 KEY (Sep. 18) $23 puts: We will hold these as long as the weighted put-call ratio for KeyCorp’s stock (KEY) remains on a sell signal.

Long 10 VIX (Aug. 19) 26 calls: We are holding this seasonal trade without a stop at this time.

Long 2 ESS (Sept. 18) $280 puts: As usual, we will hold these puts as long as the weighted put-call ratio for Essex Property Trust’s stock (ESS) remains on a sell signal.

Long 2 CVS (Sept. 18) $97.5 puts: We will hold as long as the weighted put-call ratio for CVS Health’s stock (CVS) remains on a sell signal.

Send questions to: lmcmillan@optionstrategist.com.

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08-14-26 0745ET

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