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Eleventh-Hour Bettors Target Tesla Motors Inc (TSLA)

Weekly calls are dominating Tesla Motors Inc's options pits

by 3/5/2014 11:54 AM
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Option Brief: Tesla Motors Inc (NASDAQ:TSLA) has tacked on 4.4% so far this week to trade at $255.57, after announcing plans to broaden its horizons across the pond. (In addition, TSLA and SpaceX CEO Elon Musk this morning lobbied for a piece of the military's satellite-launch market.) The stock's short-term options are in demand today, as eleventh-hour traders gamble on where TSLA will end the week. In fact, the equity's 30-day at-the-money implied volatility (IV) is 3.3% higher at 59.1%.

Call and put volume are running about neck and neck, with roughly 27,000 calls and 26,000 puts exchanged thus far. The common denominator on both sides of the aisle is time; all 10 of the most-active contracts expire at the closing bell on Friday. Plus, now is an opportune time to pick up TSLA options, as the stock's Schaeffer's Volatility Scorecard (SVS) of 100 suggests the stock has tended to make outsized moves within the past year, relative to what the options market has priced in.

On the call side, the weekly 3/7 255 strike is most active, with nearly 4,100 contracts exchanged. Most of the calls traded on the ask side, IV is trending higher, and volume has outstripped open interest at the strike -- all signs of newly bought bullish bets. By purchasing the calls to open, the buyers expect TSLA to extend its trek north of $255 through the end of the week.

On the put side, the weekly 3/7 250 strike has seen 3,200 contracts change hands, primarily at the ask price. Again, IV is trending higher at the soon-to-expire strike, underscoring our suspicions of freshly purchased positions. The goal of the put buyers is for Tesla Motors Inc (NASDAQ:TSLA) shares to take a turn for the worse over the next session and a half, as the puts will move into the money if the stock breaches $250 by Friday's close.


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