Tesla shares head into the week of October 19 under pressure ahead of the company's third-quarter earnings announcement, scheduled for October 21. The stock closed at $354.72 on Friday, down 8.7% from its October high of $388.56, following renewed scrutiny of Tesla's financial performance and its spending on artificial intelligence projects. Options activity, meanwhile, indicated that traders are positioning around the upcoming results. When the company reports, investors will assess vehicle margins, cash flow, and infrastructure spending, with the options market pointing to a possible rebound even as technical charts flag downside risk.

Options Data Point to a Modest Rebound

TSLA has retreated this month, but the options market suggests the shares could rebound modestly once the earnings report is released this week. Data compiled by Barchart shows that options expiring on Friday carry an implied volatility of 42%, well above the stock's historical volatility of 33%. The gap between the two readings instructive: implied volatility captures the movement traders are pricing into options ahead of a known event, while historical volatility measures how much the stock has actually moved. The elevated figure is not particularly alarming in context, since Tesla shares historically do not experience much volatility after earnings. The company's most recent report was an exception, proving quite volatile after it announced a significant cash outflow.

Positioning indicators tilt bullish. Barchart data show a put/call volume ratio of 0.53, meaning more call contracts than puts have traded, while the put/call open interest ratio of 0.49 likewise suggests more bullish positioning. A closer look at the options chain shows call open interest concentrated at the $370 strike, slightly above the current share price, where 61,240 contracts are outstanding — well above recent figures. The $375 strike has also drawn notable activity, holding 32,491 contracts. On the put side, most contracts are concentrated at the $340 strike, marking where downside hedging demand is clustered. As a caveat, options positioning does not always predict where an asset will ultimately trade.

Earnings to Provide Cues on AI and Capital Spending

The upcoming report has several moving parts, beginning with revenue and earnings growth. Yahoo Finance data shows that analysts expect revenue to come in at $28 billion, with the most optimistic forecast among analysts at $30 billion.

Delivery numbers already released showed that Tesla sold 486,532 vehicles in the third quarter, the vast majority of them Model 3 and Model Y units, while its other models accounted for 8,295 sales. Deliveries came in relatively weaker than a year earlier, reflecting the rush of demand that occurred late last year when Trump ended the tax credits — a policy change that pulled purchases forward and set a tougher year-over-year comparison.

Capital spending will be another focus, having contributed to the company's cash burn in the second quarter. Tesla has signaled that it will continue spending, especially on the Terafab project, alongside its Optimus and Cybercab programs. How those outlays flow through to cash flow is likely to be a key read for investors weighing the company's AI ambitions against its core automotive business.

The results will also offer more hints on the revenue trajectory. Analysts expect Elon Musk to guide to annual revenue of $107 billion, an increase of 13% from a year earlier, followed by growth of 13% to $121 billion next year, helped by rising gasoline prices.

Technicals Suggest a Retreat Is Possible

Technical signals have diverged from what the options market is pricing in. The stock bottomed at $297 in July and then soared to a high of $387. It faced substantial resistance and pulled back to $345 earlier this month, before bouncing back to retest the $387 level — a sequence that formed a double-top pattern on the daily chart, a formation chartists read as two failed attempts at the same resistance and a potential bearish reversal signal.

The two MACD lines have also formed a bearish crossover, a sign that bears are gaining momentum. The Moving Average Convergence Divergence indicator tracks momentum through the interaction of two trend lines, and crossovers of this kind are traditionally read as a warning that a trend is weakening. On that basis, the stock is likely to break down, potentially reaching the key support level of $340. On the other hand, a move above $387 would point to further gains. With these diverging signals on the table, this week's report arrives as the tiebreaker, and $340 and $387 stand as the reference points traders will watch on either side of it.

This article is for informational purposes only and does not constitute financial or investment advice. Stocks and options involve substantial volatility and potential capital losses. Investors should conduct independent research and consult a qualified financial adviser before making investment decisions.

This article originally appeared on The Market Periodical.