Retail traders scooped up Tesla as Trump-Musk spat hit stock
Trump on Thursday threatened to cut off government contracts with Musk's companies, as the once-close ties between the world's richest and most powerful man unraveled publicly on their rival social media platforms in a feud over the president's sweeping tax-cut bill.
Tesla's stock plunged 14.3% on Thursday, the 11th worst daily drop since the company went public in June 2010. As retail traders hunted for bargains, the stock rose 5.6% to $299 at mid-afternoon on Friday, though it was unclear how much of a role they played in the rally.
Self-directed individual investors scooped up a net $201.3 million of Tesla stock on Thursday after buying and selling $2.6 billion, Vanda Research estimated, making Tesla the day's second most-actively purchased stock by such investors.
"Tesla has been a favorite holding for this group for a while, so when they see a drop of 14% or more, they jump in and buy," said Marco Iachini, senior vice president of research at Vanda, noting retail investors' renewed appetite for risk-taking.
Such investors also poured money into leveraged exchange-traded funds that offer a chance to place a bullish bet on Tesla shares for amplified returns. The Direxion Daily 2x Bull ETF (TSLL.O), opens new tab drew $41.5 million of net buying on Thursday, according to Vanda data.
The options market, where Tesla is a favorite with retail traders, showed few signs of panic.
"We're not seeing a huge move in volatility," Chris Murphy, co-head of derivatives strategy at Susquehanna International Group, said of Thursday's trading, adding that some traders were taking advantage of the increased volatility to sell put options.
Selling puts, which give the buyer the right to sell the underlying shares by a certain time at a set price, signals expectations for the stock price to slow or halt its slide.
Tesla's 30-day implied volatility - an options-based measure of how much traders expect the stock to swing in the near term - rose to a six-week high of 77 on Thursday, well below the 106.1 touched in early April during a market-wide selloff, Trade Alert data showed. With Tesla shares up 5% at $299.14 on Friday morning, the implied volatility measure sank further to 68.
"I don't think we're at the real warning sign levels at the moment," Interactive Brokers chief strategist Steve Sosnick, said.
Iachini said he used models to scan comments about Tesla on social media sites like Reddit and X during Thursday's selloff, and found that users of the sites, which are popular with self-directed investors, overwhelmingly remain bullish on Tesla.
"Buy the dip is the overwhelming sentiment," he said.
Tesla shares, which surged as much as 90% in the six weeks following Trump's November 5 election, have slipped about 37% since they peaked on December 17.
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