Speculators’ love of wagering on Tesla Inc. has propelled Elon Musk ‘s electric-vehicle maker into one of the hottest stock-option trades on Wall Street.

Tesla options trading has surged recently: Nearly three million contracts now change hands on an average day, according to Cboe Global Markets data. That is up from 1.5 million a year ago and more than any other stock. Only wagers on the SPDR S&P 500 ETF outpace those on Tesla.

Tesla now accounts for roughly 7% of all options trading on an average day, based on Cboe and OCC data. On Jan. 6, the busiest day on record, more than 5.2 million contracts traded, nearly 10% of all options.

Activity in Tesla options surpassed volumes tied to the Invesco QQQ exchange-traded fund—which tracks Nasdaq-100 stocks—in December for the first time in nearly two years. And it edged out trading in Apple Inc. options on a sustained basis in July, a notable feat for the S&P 500’s now sixth-largest company by market cap to leapfrog the leader.

Many of the biggest options bets on Tesla are lottery-ticket trades requiring statistically improbable moves to pay out. For instance, the most popular bet is for Tesla shares to double within 12 months from their previous record high of $409.97. That would require a more than fivefold surge from Thursday’s close of $160.27.

Traders buying those contracts are “almost evangelical in their belief in Tesla, its technology, and to a certain extent, Elon Musk,” said Steve Sosnick, chief strategist at Interactive Brokers Group Inc. “Tesla is unique—it attracts so many speculators because of its cultlike following.” 

Once valued at more than $1.2 trillion, Tesla shares have cratered 61% from their peak in late 2021 before the Federal Reserve began raising interest rates. Growing competition from other auto makers, Mr. Musk’s split-brained focus on Twitter Inc., and waning Chinese demand have shaken confidence. Mr. Musk’s sale of tens of billions of dollars of shares hasn’t helped, either.

Tesla has become one of the most polarizing stocks on Wall Street, attracting equal numbers of enthusiastic supporters and outspoken critics. Both sides have turned to derivatives in droves to express their views: Bulls who say the company is a game-changer are betting on extreme upside scenarios, while bears who say the stock is wildly overvalued bet that the share price will plunge.

“Tesla is perpetually the most active single-stock option at our firm,” said Mr. Sosnick.

Traders have shelled out nearly $700 billion on options tied to Tesla since the start of 2022, more than any other stock or exchange-traded fund. Only index-level bets on the S&P 500 received more cash.

Bullish call options give traders the right, though not the obligation, to buy shares at a stated price by a certain date, while bearish put options grant the right to sell. The options market as a whole has boomed in recent years. Trading activity set another record last year, with more than 41 million contracts changing hands on an average day.

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Of course, fervor tied to Tesla isn’t limited to options. Although individual investors have largely lost their appetite for buying the dip in tech stocks, they continue to scoop up Tesla shares. Although still down sharply from its high, the stock has rallied 30% in January.

The propensity to bet wildly on Tesla accelerated ahead of the company’s fourth-quarter earnings report, which was posted after Wednesday’s closing bell.

Options traders predicted a nearly 13% swing—higher or lower—in the shares in the session following the report. Although that would have marked their biggest one-day move in more than a year, similar swings have become common after Tesla’s results. 

The stock rose 11% Thursday and was the S&P 500’s best performer after Tesla posted record profit but missed Wall Street expectations in other areas such as revenue. Even after that bump, the most ambitious options bettors remain far from being able to cash in. 

Write to Eric Wallerstein at eric.wallerstein@wsj.com