Tesla’s Q2 earnings report confirms the start of production on a new, more affordable electric vehicle. While specific details such as the name, features, and starting price remain under wraps, mass production is anticipated in the second half of 2025. This new model is set to be priced below the Model 3, which starts at $42,490.

Tesla also plans to increase production of the Tesla Semi and the autonomous Cybercab robotaxi by 2026. The Q2 financial figures show a revenue of $22.5 billion, a 12% decrease from the previous year. Net income dropped by 16% to $1.2 billion, and vehicle deliveries fell by 13.5% compared to the same quarter last year.

Sales performance might be affected by CEO Elon Musk’s political alignment, which has led to some consumer backlash. Tesla has debuted a limited robotaxi service in Austin, Texas, employing safety riders, and aims to expand this service to new cities with minimal costs. The company is focused on eventually operating these robotaxis without onboard safety drivers.

The coming months will be vital as Tesla introduces its more affordable EV and works to expand its autonomous vehicle ambitions.

We see the latest report creating a clear conflict for derivative traders between poor current performance and ambitious future plans. The 12% year-on-year revenue drop and 13.5% fall in vehicle deliveries create a strong bearish case for the immediate term. These figures suggest that short-dated put options could be a logical play on continued negative momentum.

The confirmation of a more affordable vehicle beginning production establishes a powerful, long-term bullish narrative. We believe traders optimistic about this 2025 goal could look at buying long-dated call options to capitalize on the potential stock appreciation once this model nears mass production. Tesla’s implied volatility remains elevated, recently hovering around 55%, indicating the market expects significant price movement.

However, we must weigh these future promises against a history of missing production timelines, as seen with the multi-year delay of the Cybertruck. This execution risk makes the 2025 and 2026 targets speculative and presents an opportunity for bearish positions. Traders could construct bear call spreads to profit if the stock stagnates or falls due to potential setbacks.

External factors are adding significant pressure, particularly intensifying competition in China where rivals like BYD sold over 300,000 battery-electric vehicles in the first quarter of 2024 alone. Consumer sentiment is also a growing concern, as a survey from Caliber showed the company’s “consideration score” among US car buyers fell to 31% early this year from a high of 70% in 2021. These headwinds, influenced by the chief executive’s public statements, may continue to dampen sales performance.

Given these opposing forces, we think strategies that benefit from volatility itself, rather than a specific direction, are prudent. A long strangle, involving the purchase of both an out-of-the-money call and put option, would allow traders to profit from a major price swing. This seems fitting for the pivotal 12-18 months ahead as the market decides whether to price in current failures or future potential.