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Tesla Motors Inc (TSLA) Option Bears See Short-Term Speed Bumps

Tesla Motors Inc traders are placing eleventh-hour bets

by 4/3/2014 2:15 PM
Stocks quoted in this article:

Option Brief: Tesla Motors Inc (NASDAQ:TSLA) is once again being targeted by short-term options traders, as the automaker's 10 most active contracts expire at tomorrow's close. Echoing this, the stock's 30-day at-the-money implied volatility (IV) is 6.9% higher at 57.7%, with overall options volume running at a roughly 90% mark-up to the intraday norm.

Most popular is the weekly 4/4 225-strike put, where about 22,000 contracts have crossed the tape. The majority of the puts traded on the ask side, IV is 9.9 percentage points higher at the strike, and volume has surpassed open interest -- all signs of newly bought eleventh-hour bets.

At last check, TSLA is 1.6% lower at $226.59, as traders watch the company's heated legal battle in New Jersey. By purchasing the weekly puts to open, the buyers are expecting the shares to steepen their retreat through Friday's closing bell, when the options expire. More specifically, the speculators will profit if TSLA is sitting south of $222.25 (strike minus volume-weighted average price of $2.75) at the end of the week. Risk, meanwhile, is limited to the initial premium paid for the puts, should TSLA maintain a perch atop the strike through the option's lifetime.

In the wake of Tesla Motors Inc's (NASDAQ:TSLA) retreat on the charts, delta on the puts has risen to negative 0.47 from negative 0.29 at Wednesday's close, implying a roughly 1-in-2 shot of an in-the-money finish. Meanwhile, the buyers can take comfort in the stock's Schaeffer's Volatility Scorecard (SVS) of 100, which indicates that TSLA shares have tended to make outsized moves over the past year, relative to what the options market has priced in.


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