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Tesla Motors Inc (TSLA) Options Are Priced to Move

Short-term call buyers target Tesla Motors Inc (TSLA) for more upside

by 5/14/2014 1:24 PM
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With roughly 58,000 contracts already on the tape, Tesla Motors Inc (NASDAQ:TSLA) is -- as is typical -- one of the more active equities in the options pits. Traders looking to buy Tesla options, particularly those with a short-term trajectory, are in luck, as the price for TSLA option premium has taken a nosedive of late. In fact, today the 30-day, at-the-money implied volatility (IV) for TSLA dropped to a 52-week low of 45.3%.

Mirroring this, Schaeffer's Volatility Index (SVI) for TSLA sits at 45%, which is lower than all but 1% of comparable readings taken over the past year. What's more, the equity's Schaeffer's Volatility Scorecard (SVS) is at an annual high. In other words -- given its year-to-date range of $136.67 to $265 -- the stock has tended to make more volatile moves than the options market has priced in.

Most active in today's session is the May 190 call, where nearly 6,200 contracts have traded (outpacing existing open interest by a decent margin). The majority of the positions have traded off the ask price, and IV has actually ticked almost 3 percentage points higher at this strike, all of which are indications of buy-to-open activity.

May-dated options will expire at the end of this week, so these calls -- placed for a volume-weighted average price (VWAP) of $3.32, are effectively a bet that TSLA will continue moving higher from its present perch of $192.76 through the next two-plus sessions. The 190-strike calls are in the money, but breakeven at expiration is $193.32, or the strike price plus the VWAP.

The stock has been in recovery mode for the last few days, bouncing back 8.3% from its earnings-induced May 8 intraday low of $178.00. The shares are now powering toward their 100-day moving average, which provided support on two recent pullbacks, but which was breached to the downside last week. (The trendline is perched at $197.89, and above this is potential round-number resistance at $200.)

Off the charts, an analyst with Deutsche Bank had some words of comfort for Tesla Motors Inc (NASDAQ:TSLA) fans. Specifically, he observed that, "we now believe that first-quarter margins were better than they appeared, supporting expectations for significant intermediate term earnings despite a significant increase in operating expenses."


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