EV Battery Maker Stock Plummets. What’s Behind QuantumScape’s Volatility.

QS Lab (Courtesy QuantumScape)

Shares of solid-state electric-vehicle battery pioneer QuantumScape were down—a lot—on Monday.

The decline probably isn’t related to any company news or EV policy changes in the U.S. Instead, the stock has been up a lot. Probably the best explanation for recent trading is that volatility typically begets more volatility.

QuantumScape stock fell 14.5% to $12.52 a share, while the S&P 500 rose 0.1% and the Dow Jones Industrial Average dropped less than 0.1%. Despite the recent drop, shares are still up 20% over the past five days. Traders might just be taking some profits.

There wasn’t much news to send shares up recently, either. Instead, bullish stock-options activity has increased lately. Stock options give the holder the right to buy or sell a stock at a fixed price in the future. Call options give the holder the right to buy a stock. Put options give the holder the right to sell a stock.

There has been more call options trading than put options trading recently. A lot of option activity can move share prices. Sometimes, sellers of call options will buy the underlying stock to hedge their position, and a lot of buying can drive up any stock’s price. Those options sellers only want to make a commission selling the call; they aren’t interested in the risk of the underlying options trade.

Through Monday trading, QuantumScape stock was up more than 140% over the past six months.

News in June that the company’s Cobra separator process had entered “baseline production” drove up shares. All batteries have separators to divide the positive and negative sides, preventing a short circuit. The separators still let ions flow, allowing the battery to produce electricity. Separators in solid-state batteries tend to be ceramic and are technically challenging to manufacture.

Solid state, in this instance, means the batteries have no liquid electrolyte, facilitating the flow of electrical charge. Solid-state EV batteries promise lower costs, more per-charge range, and a better safety record. They represent a possible panacea for EVs, making them more capable and cheaper than comparable gasoline-powered cars, but the technology isn’t ready for production vehicles yet.

The Cobra update might have kicked off the rally in QuantumScape stock. The recent trading, however, looks more like aftershock tremors from that June seismic news.

QuantumScape isn’t profitable yet. Seven analysts cover the company; one rates shares Buy. The average analyst price target is about $4.80 a share, according to FactSet.

Write to Al Root at allen.root@dowjones.com