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Option Brief: Tesla Motors Inc (NASDAQ:TSLA) is bucking the broad-market trend lower this morning, up 2% at $208.45, ahead of an expected patent announcement from CEO Elon Musk, and amid hints of a potential assembly plant in Europe on the horizon. What's more, the options crowd is gambling on even more upside for TSLA this week, with intraday call volume running at twice the normal pace.
Specifically, TSLA has seen roughly 38,000 calls cross the tape, compared to its average intraday volume of about 17,000 calls. For comparison, about 20,000 TSLA puts have changed hands so far.
Short-term options are in demand, as the stock's 30-day at-the-money (ATM) implied volatility (IV) has popped 2.1% to 38.1%, after touching a 52-week low in yesterday's session. In fact, nine of the 10 most active options expire at tomorrow's close.
Garnering the most attention has been the weekly 6/13 210-strike call, where roughly 6,600 contracts have traded, primarily on the ask side. IV has jumped 16.1 percentage points, and volume trumps open interest at the strike, suggesting the calls are being bought to open.
The calls have changed hands at a volume-weighted average price (VWAP) of $1.25, meaning the buyers will reap a reward if TSLA is perched atop $211.25 (strike plus VWAP) at the end of tomorrow's session, when the contracts expire. Profit potential is theoretically unlimited north of breakeven, while the most the buyers stand to lose is the initial premium paid, should TSLA fail to conquer the strike. In light of today's uptick, delta on the call has jumped to 0.29 from 0.17 at yesterday's close, implying a roughly 29% chance of the contracts expiring in the money.
Despite today's 30-day ATM IV rebound, Tesla Motors Inc's (NASDAQ:TSLA) short-term options are attractively priced. The stock's Schaeffer's Volatility Index (SVI) sits at an annual low of 35%, suggesting front-month options are very inexpensive right now, from a volatility standpoint. Meanwhile, the security's Schaeffer's Volatility Scorecard (SVS) of 100 indicates that TSLA has tended to make outsized moves on the charts, relative to what the options market has priced in.