Tesla Motors (TSLA) has had a hot hand this year. The stock is up more than threefold, the company posted its first-ever profit last quarter, Tesla has gobbled up 8% of the luxury car market, and the automaker repaid a government loan … early!

But many on Wall Street are wondering whether the electric-car company can continue its rapid growth as it makes the transition toward being a more traditional car company.

Tonight’s second-quarter results could provide evidence on this front. Tesla is expected to report quarterly loss of 17 to 20 cents per share — slipping back from last quarter’s profit — according to consensus estimates.

Historically, the company has had a bumpy ride on the earnings front. Specifically, Tesla has topped the consensus estimate in only three of the past seven quarters.

There are several reasons Tesla’s quarterly earnings are expected to fall back into the red. The first and foremost is lower sales of zero-emission vehicle credits to other companies — a boon that boosted earnings in the first quarter. Also, Tesla’s European launch (i.e. infrastructure) and accounting changes due to the company’s new leasing and financing programs are expected to weigh on earnings.

That said, while these developments might impact second-quarter earnings, they are positive signs for Tesla, which is going through growing pains as a developing automaker. As such, Wall Street will likely pay more attention to the company’s revenue growth and any forward-looking statements. On the former front, second-quarter revenue is seen surging to $387.9 million from $26.7 million in the same quarter last year.

Turning to the sentiment front, analysts and investors appear at odds on Tesla’s prospects.

Bullish opinions reign in the analyst community, where Tesla’s second-quarter whisper number comes in at a loss of 5 cents per share — 12 to 15 cents better than the consensus. Furthermore, the brokerage community has doled out seven “buys,” four “holds” and just one “sell” rating.

Despite the wealth of “buy” ratings, TSLA’s consensus 12-month price target could use some improvement. Resting at $120.55, on average, the brokerage bunch’s price target represents a discount of nearly 18% to yesterday’s close at $142.15. As such, there is plenty of room for potential price-target upgrades in the wake of a positive second-quarter report.

Sentiment shifts dramatically when we move outside of analyst opinions. For instance, there were currently about 18.5 million TSLA shares sold short as of the most recent data from July 15, representing 29.6% of the stock’s total float, or shares available for public trading. Even though it would only take 2.2 days to buy back all these shorts at TSLA’s daily average trading volume, there is still ample fuel here for a potentially hot short-squeeze.

Furthermore, judging by TSLA’s options activity, these short sellers don’t appear too worried about a squeeze. Typically, short sellers will buy calls in order to hedge their positions, resulting in high call open interest levels ahead of an earnings event. TSLA’s August/September put/call open interest ratio, however, arrives at 1.58, with puts easily outnumbering calls in the front two months of options.

Overall, there are about 106,000 call contracts open in the August/September series, compared to some 168,000 put contracts. Peak put open interest totals 9,494 contracts at the Sep 30 strike, followed closely by 7,924 puts at the Aug 100 strike. Admittedly, those Sep 30 puts have been open for quite some time, and probably have very little impact on current TSLA expectations. On the call side, peak open interest numbers about 6,600 contracts at the August 130 strike, with another 4,000 or so contracts open at the August 125, 135, 140 and 150 strikes.

Click to Enlarge Technically, TSLA is trading smack in the middle of this options morass. The shares have rallied steadily along support at their 10- and 20-day moving averages since April, breaching this duo only one during this time frame. As a result, TSLA is now perched just shy of a fresh all-time high above $140. The next level of resistance lies at $150, while first support is near $133 (10-day moving average) and additional support is at $114 (TSLA’s 50-day moving average).

That said, judging by weekly August implieds, TSLA could blow past these technical support/resistance levels. Currently, August weekly options are pricing in a post-earnings move of 12.7%, placing the upper bound near $160.10 and the lower bound near $123.90. Historically, during the past seven quarters, TSLA has added 6.6% on the session immediately following the company’s quarterly report, placing implieds well above historical levels.

Elevated implieds are a problem for option buyers, as it increases the prices they pay to enter positions. Conversely, higher implieds increase the premiums received for options sellers. Naturally, risk is considerable for both sides in this situation, and traders looking to enter a position ahead of Tesla’s quarterly report should use their best judgment and stick to their personal risk tolerances.

For those with the stomach to get in ahead of the report, Tesla’s strong fundamentals, the stock’s impressive rally, and the potential for unraveling bearish sentiment (i.e. a short squeeze) make a TSLA bull call spread very tempting.

After the close last night, the August 140/160 bull call spread was offered at $7.05, or $705 per pair of contracts. Breakeven for this spread lies at $147.05, roughly 3.5% above Tuesday’s close, while a maximum profit of $12.95, or $1,295 per pair of contracts, is possible if TSLA closes at or above $160 when August options expire.

As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.