Tesla (Nasdaq: TSLA) Inspires different opinions of investors. Some see the giant of the electric vehicle as an important company on the planet, while others believe it is oversized and possibly the biggest bubble in the history of the stock market. The heated debate between the two parties makes it difficult for many investors to maintain an intolerant attitude towards Tesla.
Focusing on facts is the best way to keep your emotions consistent. When it comes to Tesla, to create a short-term opportunity, two key facts are coming together that promise to be captivating to watch. And you don’t have to wait any longer because the day of reckoning is coming up in the next two weeks.
Image source: Tesla.
Why would December 18 be the day to see Tesla
These are the facts, and they are indisputable:
- As of December 3, Tesla’s stock had risen more than 600% so far in 2020. It sent the automaker’s market capitalization to over 50 550 billion.
- Tesla’s stock is to be added to this S&P 500 Index Effective from the start of trading on Monday, December 21st.
Investors will have to wait a long time when Tesla will be invited to join the ranks of about 500 companies tracked in the key benchmark. Millions of dollars in index-linked investments follow the S&P 500, so adding to the index is a big deal. The multibillion-dollar S&P of Tesla stock is expected to change hands in the next two weeks in additional preparation. To ensure that they have Tesla’s returns as part of the index calculation, investors following the S&P 500 will need to make sure they have stock exposure by the end of trading on Friday, December 18, the last trading day before the official increase.
In addition, the S&P Dow Jones index, which drives the S&P 500, said this week that Tesla would be indexed one by one. The index manager had previously suggested the possibility of Tesla being merged into two parts, but he decided not to take that route in favor of a one-time strategy.
By itself, this would be enough to create a huge volatility in Tesla’s stock. We have seen the consequences of that volatility since the S&P announcement. But many stock investors are unaware of another factor that could cause a concussion in trading Tesla shares on December 18.
Tesla and Quadruple Witch
It just so happens that December 18 is also an important day for options and futures traders. It is one of four days each year in which stock futures contracts, stock index options, individual stock options and single-stock futures contracts all expire. Traders sometimes refer to this confluence of four different endings as a quadruple witch day.
The days of the quadrangle witch often bring great instability to the whole market. Nadir of the coronavirus bear market came in two days around the day of the fourth witch on March 20, the following Monday the shares were down and then never looked back.
It will also be a big day for Tesla. Options for investors in the electric auto manufacturer play a key role with an open interest in more than 7.8 million options contracts as of early December 3rd. It may not seem like much, but with each option presenting 100 options, the underlying stock represents more. Full public float of Tesla’s 760 million shares.
Not all of those options expire on December 18th. However, some financial institutions tracking the S&P 500 will use options to guarantee their ability to get Tesla closer to the market that day – and there will be expert traders in those markets doing everything they can to take advantage of their forced purchases.
Use your focus on Tesla’s fundamentals to your advantage
Smart Tesla shareholders have used this upcoming fireworks as an opportunity. Since the announcement of the S&P 500 has simply increased the share price of Tomaker by about ડ 200 per share, you can easily see that those who have sold their stock will know that they can guarantee that the buyers will arrive on December 18.
Those interested in a long-term investment in Tesla will have two things to consider. Conversely, in the absence of company news, there is reason to believe that the path of least resistance to Tesla’s share price in the next two weeks will be ward upward. After the daily increase on December 21, many short-term traders will then sell their stock for a profit in the event of a possible short-term decline. What makes the most sensible sense for those looking to add Tesla is to buy half now and then wait until the S&P 500 event to buy the other half.
It is important to remember, however, that in the long run, the disruption caused by Tesla’s addition to the S&P 500 is not significant. If Tesla’s core business fails to perform well, then the Nessers will be right. But if Tesla implements all its potential, the next advantage lies ahead.
