Al Root

Options trading that has supported Tesla stock in the past has waned in 2026. It's another headache for investors in the electric-vehicle maker.

GLJ Research analyst Gordon Johnson recently took a deep dive into options trading for Tesla stock. He found a few things.

For starters, a lot of options on Tesla stock get traded. Second, retail traders tend to buy options aggressively. Call options give the holder the right to buy a stock for a fixed price in the future. They are bullish bets that pay off big if share prices rise quickly.

Third, aggressive call buying tends to support the stock, and most importantly, that support appears to be dwindling.

There is no fixed number of call options. Brokers are more than happy to write a call option contract if the demand is there. When a broker writes a call option, however, it might need to hedge its exposure. Brokers don't want to make or lose money on options speculation. They only want to collect a commission on the trade.

To hedge a call option, a broker can buy the underlying stock. That way, if the stock rises, the broker makes some money on the stock to offset losses on selling the options contract.

But buying stock can drive up stock prices, making the options more valuable, creating the need to buy more stock to hedge, and creating a " gamma squeeze."

Options traders use Greek letters to describe some features of options. Gamma is essentially the rate of change in a stock option's delta, and the delta is how an option price changes with changes in the underlying stock. The details are less important than understanding that aggressive call buying can create a positive feedback loop that pushes a stock price higher.

That process has played out countless times over the past few years with Tesla shares, according to Johnson. His point is that fundamentals don't always drive Tesla stock. What's more, call buying in Tesla shares has been waning, one reason that he suspects shares haven't been able to shake off their recent slump.

Coming into Friday trading, Tesla stock was down 23% this year and on the cusp of an eight-week losing streak. Johnson believes that shares will fall further without the support of options traders.

Tesla stock was down 0.2% in premarket trading at $344.82, while S&P 500 and Dow Jones Industrial Average futures were both down about 0.1%.

To be sure, Johnson has been the Street's biggest bear on Tesla stock for a long time. He rates shares Sell and has a $25.28 price target. That's roughly $380 away from the average analyst price target and $100 off the next lowest target price, and values Tesla at about $115 billion based on the company's fully diluted share count. (Tesla's stock was valued at $1.5 trillion at Thursday's close.)

While it's unsurprising to see Johnson critical of Tesla's trading, investors should understand what can drive any stock in the short- and medium-term. Over the long term, of course, earnings matter most.

Tesla stock is valued at about 170 times estimated 2026 earnings. It's a sky-high valuation because investors currently believe in AI-fueled earnings growth. Tesla launched an AI-trained robo-taxi service in Austin, Texas, in June. And it's building capacity to produce millions of AI-trained humanoid robots.

Write to Al Root at allen.root@dowjones.com

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April 10, 2026 06:20 ET (10:20 GMT)

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