Tesla shares have increased by 7% as a surge extends for a third consecutive day. Elon Musk’s purchase of $1 billion in shares on the open market has boosted the value of his stake significantly.
A technical breakout in Tesla shares had been anticipated following the rise above May’s high and a pattern of higher lows, considered a bullish sign. This ascent comes amid a broader context where a 40% spike in Oracle shares served as a warning to those shorting tech companies.
With Tesla’s shares now approaching last year’s highs of nearly $488, the market seems unfazed by traditional metrics. Instead, there is a focus on momentum, with narratives of full-self driving and robotics gaining traction.
Auto sales, margins, and profits appear to be secondary considerations at this point in the cycle. The current trend underscores the impact of compelling stories and market sentiment on share prices.
The technical breakout above the May high is a strong bullish signal we were anticipating, and it’s now playing out. With the stock surging, momentum is the only factor that matters, so we should be positioning for more upside. Derivative traders should be focused on bullish strategies for the next several weeks.
Elon Musk’s recent share purchase is fueling this rally, confirming that the current move is driven by his story, not by vehicle sales data. The market is clearly rewarding the narrative around full self-driving and robotics. For now, traditional fundamentals should be ignored in favor of sentiment.
We are seeing this sentiment reflected in the options market, where call option volume has surged over 150% from the August 2025 average to over 2 million contracts daily. This heavy speculative interest is a key ingredient for a short squeeze. This is all happening while the latest report from the Bureau of Economic Analysis showed a modest 0.2% decline in U.S. auto sales last month, confirming the disconnect from fundamentals.
This situation has echoes of the meme stock rallies we saw back in 2021, where stocks detached from reality for extended periods. Historically, trying to short this kind of powerful, narrative-driven momentum has been a costly mistake. The path of least resistance remains upward toward last year’s peak near $488.
With implied volatility on near-term options spiking above 80%, buying calls outright has become very expensive. We should instead look to use call debit spreads to reduce the cost of entry and define our risk. This strategy allows us to capture further upside while protecting ourselves from volatility crush if the rally stalls.
