Tesla's Share Price Hits a New High This Year! Is It the Beginning or the End?

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Splashing out $1 billion! Musk adds to his Tesla stake for the first time in 5 years, could this spark another rally?

After five years, Elon Musk makes another move!

According to a U.S. Securities and Exchange Commission (SEC) filing disclosed on Monday, Musk conducted a series of transactions on September 12, purchasing approximately 2.57 million shares at prices ranging from $371 to $396 per share. $Tesla (TSLA.US)$ The total value of the stock was about $1 billion.

This marks his first large-scale public market share purchase since buying shares for around $10 million in February 2020.

Analysts believe thatAs Tesla's most significant "insider," Musk's recent stock purchase is seen as a "vote of confidence" in the company.In terms of amount, this is his largest buy in history.

As of September 15, Tesla has surged nearly 20% over the past three trading days, significantly outperforming other major tech stocks and the broader market.What are the main reasons behind this strong rally? What key factors have driven Tesla's explosive stock price surge? How can investors place their bets?

What are the reasons behind this big surge?

Recent positive developments include:Musk's share increase, Tesla receiving autonomous vehicle testing permits in Nevada, the release of the revolutionary energy storage products Megapack 3 and Megablock systems, strong sales of Model Y L in China, and Musk's "trillion-dollar compensation package."

Tesla's chairman stated that only Musk can lead the company’s AI and robotics transformation over the next decade. The compensation plan considers his potential transition to roles like Chief Product Officer and includes a process for finding a successor.

Specifically:

– Musk's share increase

Musk’s nearly $1 billion investment this time is his largest individual move in the public market in recent years, significantly different from his symbolic purchase of about $10 million in 2020.

This large-scale insider purchase was interpreted by investors as a vote of confidence in the company’s future, directly igniting market enthusiasm.

Notably, Musk did not hide his strategic intent to increase his stake.He has publicly stated for a long time,that he hopes to hold at least 20% of Tesla's shares,to ensure effective resistance against activist investors or potential acquisition threats during the critical period of the company's transition into artificial intelligence and robotics.

According to some market observers, driven by this share increase, Tesla's stock price broke through the 'ascending triangle' technical pattern.

– Tesla Receives Nevada Approval for Autonomous Vehicle Testing

It was reported that Tesla received approval from the state of Nevada to test its Robotaxi service on public roads. This news drove its stock to close up about 6% last Thursday. On Friday, additional media outlets confirmed the news with Nevada's relevant departments, further boosting market confidence.

The stock’s performance reflects investors’ strong expectations for Tesla's expansion prospects in autonomous driving and artificial intelligence. Tesla CEO Musk recently stated this month that the Optimus humanoid robot business could contribute 80% of the company’s long-term value, while the company is actively expanding into emerging Robotaxi services, continuing to promote its intelligent mobility ecosystem.

– Tesla Launches Revolutionary Energy Storage Products Megapack 3 and Megablock System; Model Y L Gains Popularity in China

Tesla launched its next-generation energy storage products, Megapack 3 and Megablock systems, last week, claiming they can significantly shorten installation time and reduce construction costs,The extended-wheelbase six-seat all-electric SUV launched by Tesla in China — the Model Y L — is selling well and is considered a key driver of the stock price.

The strong momentum of the Model Y L is significant for Tesla, especially in the highly competitive Chinese electric vehicle market.With delivery schedules extending into November, this new model is expected to drive Tesla's quarterly sales performance and help maintain its competitiveness.

Previously,Has Tesla’s New Growth Driver Emerged? Model Y L Becomes Best-Selling Model; Could Stock Price See Another Surge?We have also previously analyzed in detail some recent positive factors; interested fellow investors can click to view.

– Musk's 'Trillion-Dollar Pay Package'

The chair of Tesla’s board stated that the company has developed a succession plan for Musk. Tesla presented an unprecedented compensation agreement to CEO Elon Musk,with a potential value of approximately $1 trillion,making it the largest executive pay package in U.S. corporate history.

This highly anticipated proposal aims to incentivize Musk to continue leading Tesla in the coming years, setting a series of ambitious performance benchmarks.These include expanding Tesla's robotaxi business and growing the company’s market value from the current approximately $1 trillion to at least $8.5 trillion over a 10-year span.

Morgan Stanley noted that as Tesla delves deeper into the commercialization of physical artificial intelligence, Musk has expressed a desire to hold at least 25% equity in the company to gain veto power in potential changes of corporate control, with the new plan providing an incentive path for this.

The most important signal of this plan lies in the design of its compensation structure.These targets not only include traditional business metrics such as delivery volumes and autonomous driving software subscriptions but also, for the first time, incorporate the delivery volume of 'Bots' and the impressive growth of 'adjusted EBITDA' as core evaluation criteria.

Notably, the plan includes a key clause allowing for adjustments to performance targets in the event of a 'significant' acquisition, which analysts interpret as paving the way for a potential merger between Tesla and xAI, Musk's artificial intelligence company. In Morgan Stanley's view, this compensation plan is a 'good deal' for Tesla shareholders, as it tightly aligns operational, profitability, and market value goals, making Musk's personal interests and shareholder value creation highly consistent.

Additionally, according to the latest reports, Musk mentioned plans to conduct a technical review of the AI5 chip design on Saturday, followed by a meeting next week about artificial intelligence/autonomous driving systems, Optimus robots, and vehicle production.

How can investors place their bets?

Tesla’s stock price has seen significant gains recently. Apart from directly holding the shares, investors who remain optimistic about its trend may consider participating through bullish leveraged products like TSLL and TSLG in the ETF market. For hedging or shorting, inverse ETFs such as TSLQ and TSLS are worth monitoring.

In terms of options, considering Tesla's recent strong upward momentum, higher implied volatility, and the generally bullish sentiment in the market, investors can flexibly choose appropriate option strategies based on their risk tolerance and market outlook.

Strategy One: Covered Call – Suitable for Conservative Investors

Strategy Logic:

A covered call involves an investor holding the underlying stock while selling a corresponding number of call options to collect premiums, hedging against downside risk or enhancing returns. After Tesla's rise on September 15th, with the stock price at a relatively high level, selling call options allows the investor to lower the cost basis of their holdings through premium income while maintaining their stock position.

Specifically:

– Underlying Holdings:Assume the investor holds 100 shares of Tesla stock (purchase price below $410).

– Sell Call Option:Sell one Tesla call option expiring at the end of October with a strike price of $430, collecting a premium of approximately $28 per share (the exact premium needs adjustment based on the option market price on that day).

Strategy Advantages:

– Enhanced Returns:If Tesla’s stock price does not exceed $430 by October expiration, the investor retains the entire premium, reducing the cost basis of their holdings (e.g., if the original cost was $400 and $28 is collected in premiums, the cost basis decreases to $372).

– Limited Risk:If the stock price rises above $430, investors will need to sell the stock at $430 but will be compensated by the premium received. The opportunity cost loss is limited.

Notes:

Investors must hold enough Tesla shares to cover the sold call options (1 option contract corresponds to 100 shares).

If Tesla's stock price rises significantly (e.g., above $450), investors will miss out on gains above $430, but the premium income can partially offset this loss.

2、 Strategy Two: Bull Call Spread — Suitable for Balanced Investors

Strategy Logic:

A bull call spread involves buying a call option with a lower strike price while simultaneously selling a call option with a higher strike price, thereby limiting upside gains but reducing premium costs. After Tesla’s rise on September 15, market expectations for short-term gains remain, but high implied volatility has led to higher premium costs. A spread strategy helps reduce these costs while retaining some upside potential.

Specifically:

– Buying Call Options:Buy 1 Tesla call option expiring at the end of October with a strike price of $410 (Call Option) and pay a premium of approximately $36.6 per share.

– Selling Call Options:Simultaneously sell one Tesla call option expiring at the end of October with a strike price of $430, collecting a premium of approximately $28.62 per share.

– The net cost is $36.6 - $28.62 = $7.98 per share (totaling $798 if trading 100 shares).

Strategy advantages:

– Cost reduction:By selling call options with higher strike prices, part of the cost of buying call options can be offset, reducing overall risk.

– Limited risk: If the stock price is below $410, the purchased option incurs a loss while the premium collected from selling the option remains, and there is no need to exercise. The maximum loss equals the net cost of $798 (for 100 shares). If the stock price exceeds $430, the purchased option generates profit while the sold option incurs a loss, locking in a total gain of $12.02 per share.

Notes:

It is necessary to simultaneously hold both the bought and sold call options; at expiration, they must be exercised or closed based on the stock price situation.

If Tesla's stock price fluctuates between $410 and $430, the purchased option will generate profit (stock price - $410 - $7.98), while the sold option won’t be exercised, yielding a total return of (stock price - $417.98) per share (e.g., at $420 per share, the profit is $2.02 per share).

3、Strategy Three: Long Call Option — Suitable for Aggressive Investors

Strategy Logic:

Buying a call option means that the investor pays a premium to obtain the right to buy the underlying stock at an agreed price. After Tesla's rise on September 15, the market still expects short-term gains to continue. Aggressive investors can achieve potentially unlimited upside gains with limited premium costs by purchasing call options.

Specific operations:

Buy call option: Purchase one Tesla call option expiring in October with a strike price of $420, paying a premium of approximately $32.35 per share.

Strategy advantages:

Unlimited profit potential:If Tesla’s stock price rises to $460 before the October expiration, the investor can exercise their right to buy the stock at $420 and sell it at $460. The profit will be ($460 - $420) - $32.35 = $7.65 per share (the exact figure depends on adjustments based on the premium), with theoretically unlimited upside.

Limited risk:If Tesla's stock price does not rise or even falls, the investor's maximum loss is the paid premium.

Notes:

A higher premium needs to be paid; if the stock price doesn’t rise, the entire premium will be lost.

Suitable for aggressive investors with strong expectations of short-term upward movement in Tesla's stock.

However, it should be noted that options trading carries high risks, and investors need to choose strategies appropriately based on their own risk tolerance, investment objectives, and market conditions.

Brian Wong Huang Zi Zheng

Futu Investment Strategy Expert

CE: BBH085

(The author is a licensed person under the Securities and Futures Commission and neither they nor their associates hold any financial interest in the recommended stock issuer.)

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