Schaeffer's Trading Floor Blog

Tesla Motors Inc (TSLA) Options Bets Spike Ahead of News

Options volatility surges as TSLA risks build

by 11/19/2013 10:17 AM
Stocks quoted in this article:

Tesla Motors Inc (NASDAQ:TSLA) is dominating the newswires this morning on word that the government has launched an official investigation into reports of recent Model S fires. Options players were notably active in the electric car maker's pits on Monday, driving implied volatility higher on surging demand for speculative bets. By the closing bell, roughly 375,000 contracts had changed hands -- 184,000 calls and 191,000 puts.

Less than one quarter of this volume translated as open interest overnight, however. And while Tesla Motors Inc puts dominated calls in terms of yesterday's overall volume, just 35,000 puts were eventually opened, compared with 53,000 calls. The weekly 11/22 130-strike call notched the biggest overnight increase in open interest, driven by a mix of buy-to-open and sell-to-open activity.

The security's 30-day, at-the-money implied volatility, meanwhile, spiked 10 percentage points to 62.1%, tagging its highest level since Nov. 5, when the reading rose to 68.9% immediately ahead of Tesla's earnings report. Schaeffer's Volatility Index (SVI) has surged as well, hitting 62%.

On the charts, Tesla Motors Inc (NASDAQ:TSLA) was indicated lower ahead of the opening bell, but is now 4.2% higher at $126.66. Right out of the gate, however, the stock hit the $119.22 level, its lowest point since mid-July.

As our founder and CEO Bernie Schaeffer flagged in an early morning email, the $120.20 mark represents a 61.8% retracement level from the equity's all-time high of $194.50 (and could therefore represent support). Also, the stock's 14-day Relative Strength Index (RSI) tagged the 27.92 level yesterday, its lowest point since January 2012. In other words, Tesla Motors Inc (NASDAQ:TSLA) may have dipped into oversold territory, and a bounce higher could be in the offing.

Daily chart of Tesla Motors Inc (NASDAQ:TSLA) since May 2013

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