Tesla Inc. shares are less closely correlated to those of large U.S. tech companies than they were before the earnings report. Bitcoin could be one reason.
The 20-day correlation between Tesla stock price and Nasdaq 100 index fell from 0.83 on June 17, to 0.14 Wednesday. The relationship between Tesla’s stock and the NYSE FANG+ Index, which is made up of the largest tech companies such as Amazon.com Inc., Facebook Inc., and Apple Inc., has also declined. Tesla reported earnings on July 26.
Amy Wu Silverman, RBC Capital Markets’ derivatives strategist, stated in an email that Tesla was highly correlated with megacap tech and that the relationship had really decoupled in near-term. “When I ask around, I get the feedback that this is due to their Bitcoin exposure. They will need to account for it when they report earnings.
After Elon Musk’s praises about Bitcoin, Tesla announced a $1.5 Billion investment in Bitcoin in February. It was speculated that other companies might follow the lead, but few have. Tesla has since sold some of its holdings and Musk has come out as a critic for Bitcoin, including because of his energy consumption.
Tesla’s stock price has fallen almost 4% in this month. However, the Nasdaq 100 has risen more than 2%. Bitcoin fell from its peak of nearly $65,000 in mid April to $32,500, amid a wide retreat in investor appetites for speculative assets such as cryptocurrencies.
Silverman pointed out that Tesla has an ‘extremely high’ skew. This is a measure of the cost of bearish options relative to bullish ones.
She said that Tesla spends a lot time with ‘inverted-skews’ as both retail and institutions love buying out-of the-money options in the name. Silverman said that those looking to trade bearishly might want to consider using put spreads in order to take advantage the high skew.