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Most Active Options Update: Tesla Motors Inc (TSLA)

Dissecting a short put spread on TSLA

by 12/3/2013 2:41 PM
Stocks quoted in this article:

The 20 stocks listed in the table below have attracted the highest total options volume during the past 10 trading days. Names highlighted are new to the list since the last time the study was run, and data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White. Three names of notable interest this afternoon are Tesla Motors Inc (NASDAQ:TSLA), Apple Inc. (NASDAQ:AAPL), and Ford Motor Company (NYSE:F).

Apple Inc. is trading higher today, in the wake of some upbeat analyst attention. In the options pits, the stock's weekly 12/6 570-strike call is the most sought-after position, and with AAPL lingering near $561.35, this out-of-the-money call is seeing a mix of buying and selling activity. Elsewhere, Ford Motor Company has shed more than 3%, after announcing it will scale back production in the first quarter. The stock was last seen hovering around $16.52, prompting sell-to-close activity at F's weekly 12/6 17-strike puts. Finally, here's a closer look at how one Tesla Motors Inc trader used puts to place a neutral-to-bullish near-term bet.


Tesla Motors Inc is having quite a day, with the shares up 13.3% to trade at $140.79. This burst of buying power came after the German Federal Motor Transport Authority said Tesla's Model S sedans do not pose a fire hazard. Additionally, Morgan Stanley named the stock a "Top Pick," following the equity's recent consolidation. Against this backdrop, overall option activity on TSLA has soared to nearly two times the average intraday volume.

Diving in deeper uncovers what appears to the creation of a short put spread in TSLA's weekly 12/6 option series. Specifically, two symmetrical blocks of 4,482 contracts simultaneously switched hands at the weekly 12/6 124-strike put and the weekly 12/6 122-strike put. The former traded at the bid price of $0.35, while the latter went off at the ask price of $0.27, establishing a net credit of $0.08. Implied volatility ticked higher at each leg, and volume outstrips open interest, suggesting new positions have been initiated.

Ideally, TSLA will remain above $124 through this Friday's close, allowing both legs to expire worthless, and the speculator to retain the modest initial net credit as her full potential reward. However, she'll still be able to break even as long as TSLA remains above $123.92 through week's end, which is the sold put less the net credit. Risk, meanwhile, is limited to $1.92, or the difference between the strikes minus the net credit received.


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