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Tesla Motors Inc (TSLA) Bullish Betting Hits Fever Pitch

Tesla Motors Inc calls are trading at four times the normal rate

by 6/17/2014 11:09 AM
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Option Brief: Tesla Motors Inc (NASDAQ:TSLA) is extending yesterday's advance, up 4.1% at $233.70, as traders celebrate encouraging legal news in New Jersey. Against this backdrop, TSLA call options are trading at four times the average intraday rate, with speculators wagering on more upside for the shares through the end of the week.

So far today, the electric automaker has seen roughly 80,000 calls change hands, compared to around 50,000 puts. Short-term options are once again in demand, as the security's 30-day at-the-money implied volatility (IV) has popped 3.9% to 44.7%, and the 10 most active options expire at Friday's close.

The security's June 230 and 240 calls are most active, with roughly 9,500 and 7,000 contracts exchanged, respectively. A healthy portion of the calls crossed on the ask side, IV has shot higher at both strikes, and volume trumps open interest, hinting at newly bought bullish bets.

In light of TSLA's ascent, delta on the 230-strike calls has jumped to 0.66 from 0.35 at Monday's close, pointing to a roughly 2-in-3 shot of expiring in the money. However, today's call buyers won't profit unless TSLA is perched atop $234.59, which is the strike plus the volume-weighted average price (VWAP) of $4.59. Beyond this breakeven level, profit potential is theoretically unlimited, while the most the buyers can lose is the initial premium paid for the calls, should TSLA backpedal beneath $230 by Friday's close.

Meanwhile, delta on the out-of-the-money 240-strike calls has more than doubled, to 0.35 from 0.14 at Monday's close, implying a 35% chance of an in-the-money finish on Friday. The VWAP of the calls is $1.72, meaning at-expiration breakeven for the buyers stands at $241.72 -- in territory not charted since mid-March.

On the charts, Tesla Motors Inc (NASDAQ:TSLA) has added more than 12% so far in June, and is poised to close a second straight session atop its 80-day moving average -- a feat not accomplished since early May. Off the charts, TSLA fans are celebrating the aforementioned news in New Jersey, where the State Assembly passed a law that will allow TSLA to directly sell to consumers (the bill still needs to be passed by the state's Senate, however), and are keeping an eye on CEO Elon Musk's other pet project: SolarCity Corp (NASDAQ:SCTY), which just announced the purchase of Silevo Inc.


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