Tesla's Call Option Surge: A Bullish Bet on Tariff Winds?

The recent surge in Tesla (TSLA) call option buying activity, as highlighted by the Moomoo Community, signals a bold bet on the electric vehicle giant’s prospects amid shifting trade policies. A multi-million-dollar block trade—134,000 call options struck at $700 with a 2027 expiration—suggests institutional investors are pricing in significant upside, even as Tesla’s stock languishes below its 2024 highs. But is this a savvy play on trade winds in Tesla’s favor, or a gamble against headwinds of its own making?

The Trade That Demands Attention

On the day of the reported trades, Tesla’s shares rose as high as $367.34, a level unseen since February 2024. The catalyst? Speculation around U.S. President Donald Trump’s proposed 25% tariffs on imported automobiles—a policy that could reshape the auto industry. The options trade itself is a bear call spread: buyers paid $7.39 million for 134,000 calls at $700 strike prices while simultaneously selling 134,000 calls at $800 strikes, both expiring in January 2027. This strategy caps potential gains but reduces the upfront cost compared to a straight call purchase.

The spread’s structure hints at cautious optimism. To profit, Tesla’s stock must rise above $700 by 2027—a 96% increase from current prices—but gains above $800 would dilute returns. For investors, the trade balances ambition with risk, leveraging the tariffs’ potential impact on Tesla’s competitive edge.

Tariffs as a Double-Edged Sword

Analysts have long highlighted Tesla’s unique position in a trade-war scenario. Unlike peers like Hyundai or Volkswagen, all Tesla vehicles sold in the U.S. are domestically produced, shielding them from import tariffs. Morningstar’s Seth Goldstein noted this “relative advantage” could boost Tesla’s market share in luxury and electric segments. However, tariffs on semiconductors, steel, and aluminum—critical components for Tesla’s production—could offset gains.

Tesla’s stock has been a rollercoaster: a 63% surge in 2023 gave way to a 10% decline year-to-date in 2024. The $700 strike price, far above current levels, reflects a belief that Tesla can overcome near-term headwinds like weak Q1 deliveries and supply chain challenges. Yet, the trade’s 2027 expiration implies patience—a bet on Tesla’s long-term dominance in EVs, autonomous driving, and energy storage.

The Risks in the Rearview

While the tariff narrative is compelling, execution remains uncertain. Competitors like Ford and GM are ramping up U.S. production to avoid tariffs, while Tesla’s own cost structure faces scrutiny. A would underscore whether its domestic edge translates to profitability.

Moreover, the options trade’s $7.39 million premium—equivalent to $55 per contract—assumes Tesla’s stock can sustain upward momentum. If the tariffs falter in Congress or competitors adapt faster, the $700 strike could become a distant target.

Conclusion: A High-Wire Act for Bulls

Tesla’s call option surge is a high-stakes wager on two variables: the durability of trade policies favoring U.S. manufacturing and the company’s ability to scale profitably. With the $700 strike representing a 96% premium to current prices, bulls are not merely optimistic—they’re betting on a paradigm shift.

Historically, Tesla’s stock has rewarded bold bets: its 63% 2023 rally and 2024 peak at $386.05 prove its volatility. Yet, the path to $700 by 2027 demands more than tariffs—it requires sustained innovation, cost discipline, and market share gains. For now, the options trade serves as a barometer: institutional money is signaling confidence, but the road ahead is fraught with legislative and operational hurdles.

Investors weighing in should ask: Can Tesla’s domestic production and tech leadership offset rising input costs and regulatory risks? The answer may decide whether this $7.39 million options bet becomes a masterstroke—or a cautionary tale.