Sensitivity Analysis Based on Portfolio Option Models Using Tesla and Nio as Examples

Abstract

The electric vehicle (EV) industry is undergoing a significant transformation, driven by environmental concerns, advancements in battery technology, and changing consumer preferences. Companies like Tesla and China's NIO are at the forefront of this revolution, showcasing the global potential of EVs. This study undertook a sensitivity analysis of these two leading EV manufacturers, Tesla and NIO, to understand the dynamics of their stock prices and implications for investment strategies. Data was meticulously collected from various financial databases to capture daily stock prices, which were then used to compute monthly returns. The study also delved into options, focusing on the strike prices and volatility of Tesla and NIO options. Using a combination of stock prices, strike prices, and volatility, the intrinsic and time value of these options were analyzed. The research employed a composite option model to describe the price variation of an option, considering factors like asset price volatility, risk-free rate, and dividend yield. The findings revealed that stock prices and option prices exhibited certain sensitivities to market variables. For instance, Tesla's option prices showed an upward trend with rising stock prices, while NIO's option prices displayed varied responses to stock price changes. The study underscores the importance of understanding these sensitivities for informed investment decisions in the evolving EV market.