Ferrari’s 12% Plunge: What’s Behind the Luxury Icon’s Sudden Drop?

Summary
• Ferrari shares slump 12% in biggest drop since 2016 listing
• RACE trades at $431.84, down 2.6% from open to intraday low of $428.005
• Citi analysts question Ferrari’s margin sustainability amid slowing ASPs and shipments
• Intraday volatility highlights bearish RSI (31.2) and MACD divergence

Ferrari’s sharp intraday decline has drawn immediate attention as the luxury automaker’s stock sinks below $432, its weakest level since early 2024. The sell-off, coinciding with a broader automotive sector selloff led by Tesla’s 2.8% drop, raises urgent questions about Ferrari’s pricing strategy and margin resilience. With technical indicators flashing red and a bearish options chain amplifying pressure, investors must dissect whether this is a short-term correction or a warning sign of deeper structural challenges.

Pricing Strategy and Margin Anxiety Spark Panic
Ferrari’s 12% intraday plunge stems from a strategic announcement to reduce U.S. price compensations as tariffs on EU-made products ease to 15% from 27.5%. While the company maintains its guidance, Citi analysts highlighted a critical shift in market focus: investors are now scrutinizing Ferrari’s ability to sustain high EBIT margins amid slowing sales volumes and decelerating average selling prices. The decision to trim price premiums—previously a margin booster—has been interpreted as a signal of waning pricing power in its core U.S. market, triggering a liquidity-driven selloff despite unchanged financial targets.

Automotive Sector Under Fire as Tesla Leads Downturn
The automotive sector is broadly under pressure, with Tesla (TSLA) leading the decline at -2.8% on concerns over EV demand moderation. Ferrari’s drop aligns with sector-wide margin fears, particularly as luxury automakers face softening demand in China and inventory management challenges. While Ferrari’s pricing strategy is unique, the sector’s shared exposure to macroeconomic headwinds—rising interest rates and slowing global growth—amplifies the risk of further sell-offs if earnings momentum fails to rebound.

Bearish Technicals and Options Plays for Volatility
• 200-day MA: $459.82 (well below current price)
• RSI: 31.2 (oversold territory)
• MACD: 1.68 vs. signal line 6.42 (bearish divergence)
• Bollinger Bands: Price at $431.84 vs. lower band $464.88 (oversold)
• Support levels: 431.40–433.80 (critical near-term floor)

Technical indicators confirm a bearish setup. RSI’s oversold condition (31.2) and MACD’s negative histogram (-4.74) suggest momentum remains on the downside. The 200-day moving average at $459.82 acts as a psychological ceiling for any rally, while the lower Bollinger Band at $464.88 is now a distant resistance. Short-term traders should monitor the 431.40–433.80 support corridor, as a break below this could trigger a test of the 52-week low at $391.54.

• RACE20250815C430 (Call, $430 strike, 8/15 exp):
- IV: 27.66% (moderate)
- LVR: 38.34% (high leverage)
- Delta: 0.56 (balanced sensitivity)
- Theta: -0.88 (rapid time decay)
- Gamma: 0.0162 (strong price sensitivity)
- Turnover: 6,144 (high liquidity)
- Payoff at 5% downside: $0 (out of money)
- This contract offers high leverage for aggressive bulls but faces time decay risks as expiration nears. Ideal for directional bets if a rebound above $430 occurs.
• RACE20250815C440 (Call, $440 strike, 8/15 exp):
- IV: 36.46% (elevated)
- LVR: 44.54% (strong leverage)
- Delta: 0.43 (moderate sensitivity)
- Theta: -0.84 (rapid decay)
- Gamma: 0.0123 (moderate sensitivity)
- Turnover: 770 (adequate liquidity)
- Payoff at 5% downside: $0 (out of money)
- A high-IV play for those betting on a sharp rebound above $440, though theta decay could erode value rapidly. Best for high-risk, high-reward strategies.

Backtest Ferrari Stock Performance
The backtest of RACE's performance after a -3% intraday plunge shows favorable results, with win rates and returns indicating positive short-to-medium-term gains. The 3-Day win rate is 56.99%, the 10-Day win rate is 54.20%, and the 30-Day win rate is 63.11%. The maximum return during the backtest period was 6.46%, suggesting that RACE has a good chance of recovering from a significant intraday dip.

Short-Term Bearish Bias: Prepare for a 52-Week Low Test
Ferrari’s technicals and options dynamics signal a high-probability continuation of the downtrend. The RSI’s oversold condition and MACD divergence suggest momentum remains bearish, with the 431.40–433.80 support zone critical to watch. A break below this could trigger a cascade toward the 52-week low at $391.54. Investors should also monitor Tesla’s -2.8% move for sector-wide implications. For now, short-side positions or cash-secured puts may offer strategic upside, but volatility remains elevated. Aggressive traders may consider RACE20250815C430 into a potential rebound above $430.