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The seemingly indefatigable Tesla Motors Inc (NASDAQ:TSLA) is moving higher again today, up 1.4% to $184.92 after earning a price-target hike from Wedbush Securities this morning. The automaker's options pits are typically crowded, but the most active strike is on the put side, as speculators zero in on the weekly 9/27 175-strike put.
Unlike the recent put buying my colleague Karee Venema reported on Monday, however, a cluster of these puts were sold to open, per data from the International Securities Exchange (ISE). A number of blocks traded off the bid price, and implied volatility is up 6.3 percentage points at the strike, reinforcing this interpretation.
The puts traded for a volume-weighted average price (VWAP) of $0.93, which is the maximum potential profit for these put sellers, should TSLA still be trading above the $175 level when the options expire this Friday afternoon. If the shares stumble and drop below this strike, the put sellers will likely be on the hook to buy the shares at the market price (no matter what that might be). The purchase price is then offset by the credit collected for selling the contracts.
Assuming the put sellers wouldn't mind being Tesla Motors Inc (NASDAQ:TSLA) shareholders, they may be happy to get "paid to wait" for a pullback, which could present an opportune time to enter a new long stock position. In this example, they net a small profit if TSLA continues higher (or goes nowhere) over the next few days, but otherwise secure a purchase price of $175. Tesla closed below the $175 mark as recently as last Wednesday, ahead of the stock's Sept. 19 pop to a new record high.
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