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Optimism Wanes on Tesla Motors Inc (NASDAQ:TSLA)

Call speculation slows in TSLA shares

by 4/11/2013 10:35 AM
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Tesla Motors Inc (NASDAQ:TSLA) has taken speculators on a wild ride of late, with cryptic announcements followed by jumps into uncharted territory. Month-to-date, the shares are up more than 13% at $43.12, but option speculators seem to be loosening up on the bullish reins. In fact, the amount of call speculation has decreased dramatically during the last two weeks.

On April 1, when TSLA reached a new all-time high of $46.68, Schaeffer's put/call open interest ratio (SOIR) for the stock stood at 0.85, in the 38th percentile. Put simply, call open interest outweighed put open interest among options with a shelf-life of three months or less, and this ratio was lower than 62% of the past year's readings. Since then, the SOIR has zoomed up to 1.16, indicating that put open interest is now more prominent for short-term options. What's more, this ratio is higher than 88% of the past year's readings, suggesting speculators have taken a renewed interest in Tesla Motors put options.

In a similar vein, buy-to-open activity at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) has slowed down considerably on the call front. The 10-day call/put volume ratio has dropped from 4.52 on April 1 to 2.72 currently. Although call buying continues to trump put buying by a healthy margin, that margin has shrunk drastically during the last two weeks.

Elsewhere, short sellers never abandoned their skeptical outlook. Currently, more than 40% of the stock's float has been sold short, representing a short-interest ratio of 22.9 days to cover. If Tesla does continue to move higher, these bears may be forced to head toward the exits, sparking a self-perpetuating short-covering rally.

Tesla Motors Inc (NASDAQ:TSLA) could also benefit from a change of heart among analysts. Currently, the average 12-month price target stands at $43.35, which is just a hair above the stock's current price. Any future price-target hikes could keep Tesla's upward momentum chugging along.


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