Why Trump’s win is driving Tesla shares to new highs

• Tesla shares hit a 2-year high, driven by Musk’s alignment with President-elect Trump and bullish options trading.
• With Elon Musk’s alliance with Trump, investors expect regulatory boosts for Tesla’s tech and autonomous driving projects.

What happened

Tesla’s stock is riding a powerful wave of investor interest, surging to its highest level since April 2022 following Donald Trump’s win in the recent U.S. presidential election. Investors are not only snapping up Tesla shares but are heavily focused on bullish options, with trading volumes reaching twice the usual level. On Monday alone, over 2.5 million Tesla options were traded, with much of the activity centered around near-term contracts expiring by week’s end. Options dealers saw a strong demand for call options set at $350 and $400, reflecting market anticipation of further gains for Tesla stock.

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Elon Musk, Tesla’s CEO, has been vocal in his support for Trump throughout the election, donating millions to pro-Trump efforts. His longstanding relationship with Trump has prompted investor confidence that Tesla, along with Musk’s other ventures, might benefit under the new administration. Policy changes and regulatory support for tech and automotive sectors could become more favourable, with analysts at Wedbush Securities referring to Trump’s win as a “gamechanger” for Tesla’s future in autonomous driving and AI.

This recent surge in bullish options trading highlights investors’ expectation that Musk’s close ties with the incoming administration could yield regulatory benefits, especially for Tesla’s energy and AI technology pursuits. However, analysts note that while Tesla options remain popular, a slowdown in the stock’s recent momentum could drive down call prices, as traders might seek to hedge or sell their contracts.

Why this is important

The intensified trading activity surrounding Tesla is a clear sign of investor confidence, heavily influenced by Musk’s high-profile support for Trump. This alignment could spell significant shifts in policy that benefit Tesla’s growth areas, including electric vehicles and autonomous tech, as federal incentives and subsidies may lean in Tesla’s favour. With bullish trading pushing Tesla stock higher, the company’s valuation could see even more significant gains if these investor expectations align with upcoming policy moves.

However, the concentration in short-term options and call contracts also signals potential volatility. If the market’s optimism falters or policy support doesn’t materialize as anticipated, Tesla’s stock could face downward pressure as options positions adjust. The current enthusiasm serves as a snapshot of how political alliances can impact market sentiment and propel trading strategies.