Options Traders Are Disregarding Tesla's Positive Earnings History

Near-term options traders are unusually put-heavy toward TSLA, despite the company's upbeat earnings history

Oct 31, 2017 at 12:50 PM
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Tomorrow, traders will digest earnings from electric car maker Tesla Inc (NASDAQ:TSLA) after the close. Here's a closer look at TSLA stock ahead of earnings, and how options traders have been positioning themselves on the automaker's shares.

Earnings History Is On TSLA's Side... 

Though still up 51.6% year-to-date, Tesla stock has struggled since touching a record high of $389.61 on Sept. 18, thanks, in part, to Model 3 production concerns. The shares recently tested their 200-day moving average for the first time since early January, following a handful of bearish analyst notes. However, Tesla stock was last seen up 1.4% at $324.52, and could climb even higher after tomorrow's earnings report, too, if past is precedent.  

Historically, TSLA shares have moved higher the day after five of the company's last eight reports, with an average post-earnings move of 5.2%, regardless of the direction. After earnings in August, the stock added 6.5% in one day. This time around, the options market is pricing in a bigger-than-usual one-day swing of 10.4%, per at-the-money implied volatility data. A jump of this nature would send the security to the $357 neighborhood.

...But Options Traders And Analysts Are Not

Short-term options traders, however, could be predicting a swing lower, as evidenced by the stock's Schaeffer's put/call open interest ratio (SOIR) of 1.49, which ranks in the 70th percentile of its annual range. In other words, near-term speculators are more put-heavy than usual ahead of the earnings event.

The security's 10-day put/call volume ratio on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and the NASDAQ OMX PHLX (PHLX) of 0.93 also ranks in the 70th percentile of its annual range, meaning options players have bought to open TSLA puts over calls at an accelerated pace during the past two weeks.

Peak put open interest in the front-month series can be found at the November 300 put, with more than 5,900 contracts outstanding. A healthy portion of these puts were bought to open, suggesting "vanilla" buyers expect TSLA stock to breach $300 by the close on Friday, Nov. 17, when the options expire. The shares haven't traded south of that century mark since May.

What's more, short interest accounts for roughly 23% of Tesla stock's total available float, or 27.42 million shares. This represents 4.7 times the equity's average daily trading volume. Plus, more than 60% of the analysts following TSLA rate it a "hold" or worse.


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