RBC Proposes Options Bet on Bitcoin-Linked Tesla and MicroStrategy

Options traders could right now take advantage of a rare divergence in options metrics between the two bitcoin (BTC)-holding companies MicroStrategy and Tesla, a strategist at investment bank RBC Capital Markets has suggested.

According to a note written by RBC derivatives strategist Amy Wu Silverman, the stocks of both companies have risen along with the bitcoin price. However, the skew measuring the cost of bearish options bets – known as puts – versus bullish bets – known as calls – is now inverted for MicroStrategy while Tesla is at highs, Bloomberg reported on Monday.

“Frankly, it shocks me anytime Tesla skew isn’t inverted. However, it does present an opportunity to bet on a skew inversion by selling expensive Tesla puts for out-of-the-money Tesla calls,” the report quoted the strategist.

Specifically, the RBC note suggested a reversal trade that involves selling Tesla puts with a strike price of USD 700 expiring in December, and buying USD 930 call options, in anticipation that the skew on Tesla options will invert again.

However, the strategist also added that Tesla’s earnings are scheduled to be released soon, saying that this could be a factor in the proposed options bet. 

Tesla said it will announce its earnings for the third quarter on Wednesday, October 20.

Meanwhile, investment advisor and bitcoin proponent Lyn Alden noted that bitcoin and Tesla have been “more correlated than most other assets over the past two years” but that bitcoin has outperformed Tesla since May 2020, helped by the price rally in October.

As of this recent rally, $BTC has outperformed $TSLA since the day I went bullish on $BTC, but it's been a close back-and-forth race: pic.twitter.com/lN4RmOoVVc

— Lyn Alden (@LynAldenContact) October 18, 2021

Like MicroStrategy, Tesla also holds bitcoin on its balance sheet, although a less significant amount. In its quarterly report, Tesla said that, as of June 30, 2021, the carrying value of their BTC holdings was USD 1.31bn, meaning that, on that day, they held around BTC 36,420. It’s worth USD 2.26bn today.

In the first quarter of this year, Tesla sold about 10% of its bitcoin holding, realizing a profit of USD 101m, as part of an effort by CEO Elon Musk “to prove liquidity of bitcoin as an alternative to holding cash.”

Meanwhile, per the latest data, MicroStrategy holds a total of BTC 114,042 purchased at an average price of USD 27,713. This stash is worth more than USD 7bn today.

At 15:10 UTC, BTC trades at USD 62,224 and is up by 2% in a day and 14% in a week. The price jumped by 32% in a month.

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