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Tesla Motors Inc (TSLA) Draws Last-Minute Traders Before Musk Remarks

Tesla Motors Inc traders are picking up soon-to-expire options

by 4/25/2014 11:48 AM
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Option Brief: Tesla Motors Inc (NASDAQ:TSLA) has retreated in step with the broader equities market, down 4% at $199.50. What's more, options traders are placing bets on TSLA's afternoon trajectory, with CEO Elon Musk slated to make "an important SpaceX announcement" at 1 p.m. ET, according to an email sent to reporters.

Around midday, TSLA has seen roughly 43,000 calls and 50,000 puts change hands, compared to its average intraday volume of about 34,000 calls and 32,000 puts. Short-term options are in demand, as the equity's 30-day at-the-money implied volatility has jumped 2.7% to 71.6%. What's more, nine of the 10 most active strikes expire at today's close, and eight of those have seen volume surpass open interest, underscoring our theory of new last-minute initiations.

Most popular is the weekly 4/25 200-strike put, where roughly 10,400 contracts have changed hands, primarily at the ask price, suggesting they were bought. Plus, volume has exceeded open interest, hinting at fresh bearish bets. By purchasing the puts to open, the speculators expect TSLA to extend its retreat beneath $200 through the next few hours. Risk, meanwhile, is capped at the initial premium paid for the puts.

Elsewhere, skeptical speculators are also employing calls to bet on an afternoon ceiling for TSLA. Specifically, it appears some traders are selling to open the weekly 4/25 205-strike call, where nearly 6,000 have traded on open interest of fewer than 2,500 contracts, with most crossing at the bid price. By writing the calls to open, the sellers hope TSLA remains beneath $205 through the closing bell. In this best-case scenario, the calls will remain out of the money, and the sellers will retain the entire net credit.

In other news, three Federal Trade Commission employees yesterday said the bans on direct-to-consumer sales -- which have been plaguing Tesla Motors Inc (NASDAQ:TSLA) in Arizona and New Jersey, among other states -- are not only outdated, but "bad policy." Looking ahead, the company is slated to report first-quarter earnings after the close on Wednesday, May 7.


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