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Positive Safety Rating Spurs Tesla Motors Inc (TSLA) Call Activity

Are some of today's TSLA call players actually skeptics masked as bulls?

by 12/24/2013 11:36 AM
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Tesla Motors Inc (NASDAQ:TSLA) is up 6.9% today to perch at $153.50, after the National Highway Traffic Safety Administration reaffirmed the company's 5-star safety rating for its Model S vehicle. Not surprisingly, call activity is running rampant in the stock's options pits, as approximately 74,000 contracts have traded thus far. This is more than double the expected intraday pace, and twice the number of puts exchanged. In fact, eight of the 10 most actively traded strikes are on the call side of the tape.

Today's campaign for calls over puts is simply more of the same for the electric vehicle maker. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows that traders have bought to open 136,328 calls during the past two weeks, compared to 70,167 puts. The resultant 10-day call/put volume ratio of 1.94 ranks in the 82nd annual percentile, reflecting a healthier-than-usual appetite for calls over puts lately.

However, it's also worth mentioning that short interest surged by more than 36% during the last two reporting periods, and now these bearish bets make up a brow-raising 33% of TSLA's available float. This raises the possibility that some of the recent call buying -- particularly at out-of-the-money strikes -- could be the result of hedging activity by short sellers.

Still, there's no denying the equity's technical prowess, even after factoring in a downturn that transpired in October and most of November. Tesla Motors Inc (NASDAQ:TSLA) boasts a year-to-date gain of about 353%, and has outpaced the broader S&P 500 Index (SPX) by roughly 328 percentage points during this same time frame.


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