Tesla Stock Puts Bears on Notice as Rally Resumes

Analysts and options traders have been unusually pessimistic toward Tesla Inc (TSLA)

by Kirra Fedyszyn

Published on Mar 14, 2017 at 3:04 PM
Updated on Jun 24, 2020 at 10:16 AM

Electric carmaker Tesla Inc (NASDAQ:TSLA) is moving higher again, amid reports the company is planning to produce a small SUV, dubbed Model Y, to be launched next year and priced just above its mass-market Model 3 sedan. The shares bounced from support at the $243 mark -- home to their rising 60-day moving average -- earlier this week, and are up 4.3% at $256.76 today. Despite the stock's impressive recent run, however -- it climbed 59% from its November annual low to its two-year high above $287 in mid-February -- TSLA remains surrounded by pessimism both in and outside of the options pits.

TSLA Daily Stock Chart March 14

Beginning in the options arena, long puts have been unusually popular, per TSLA's 10-day put/call volume ratio of 1.12 on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) -- higher than 89% of all readings from the past year. Likewise, the stock's Schaeffer's put/call open interest ratio (SOIR) of 1.56 not only shows put open interest easily outweighing call open interest among options in the front three-months' series, but also ranks in the 78th annual percentile. An unwinding out outstanding bearish positions could give TSLA another boost on the charts.

Notably, longer-term bets on TSLA seem to be the norm, as only two of the stock's top 10 open interest positions are due to expire in 2017. Among these is the March 230 put, where data from the major exchanges confirms a large number of positions were bought to open, with buyers betting on or hedging against a drop below the $230 mark by the end of this week, when the front-month series expires.

It happens to be a particularly attractive time to pick up the premium on the stock, too. With a Schaeffer's Volatility Index (SVI) of 33% -- in the low 16th annual percentile -- TSLA's short-term options are pricing in muted volatility expectations at the moment. Plus, a Schaeffer's Volatility Scorecard (SVS) of 89 indicates the options market has underpriced the equity's ability to make big moves over the past 12 months.

Looking outside of options land, analysts haven't been particularly optimistic, with 13 out of 16 brokerages doling out "hold" ratings or worse. That's not to say TSLA isn't getting any attention, though. Deutsche Bank offered up a price-target hike to $220 from $215 this morning, but that still represents a huge discount to current levels. An overdue round of upbeat analyst notes could certainly be a boon for the shares.

Separately, notorious short seller Andrew Left of Citron Research told CNBC last night he is flat on Tesla Inc (NASDAQ:TSLA), "which probably means the stock will go down," while implying he covered his short position on the stock earlier in the day, after hearing about Mobileye NV's (NYSE:MBLY) big buyout deal. In fact, short sellers have broadly been in covering mode in recent weeks. But the 31 million shares still shorted represent nearly one-quarter of Tesla stock's available float -- plenty of purchasing power to add fuel to the security's fire.

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