Model S Recall Delights Tesla Motors Inc (TSLA) Bears

A seat belt malfunction is forcing Tesla Motors Inc (NASDAQ:TSLA) to take another look at every single Model S it's produced

by Josh Selway

Published on Nov 20, 2015 at 1:45 PM
Updated on Jun 24, 2020 at 10:16 AM

Tesla Motors Inc (NASDAQ:TSLA) is off 2.1% today at $217.20, on news the electric automaker is recalling every single Model S sedan it has produced -- 90,000 total units -- due to a report of a seat belt malfunction. However, the company stated the cost of the recall will be "immaterial." Considering the bearish sentiment surrounding the stock on Wall Street, this isn't bad news for everyone. 

For starters, TSLA has been a longtime target of short sellers. As it currently stands, 26.4% of the stock's float is controlled by shorts. At normal daily volumes, it would take over six sessions for these bears to cover. 

In the options pits, there's been a clear preference for puts over calls. This is evidenced by TSLA's Schaeffer's put/call open interest ratio (SOIR) of 1.34. Not only does this reveal that put open interest outweighs call open interest among options expiring within three months, but it also outranks 69% of readings from the past year. This means short-term option traders are more put-skewed than normal.

In today's trading, puts are again popular amid the negative news, crossing at twice the typical afternoon pace. The November 210, 215, and 220 strikes are leading the way, and it looks like traders are buying them to open in hopes of extended losses through today's close, when the series expires. 

Even analysts have taken the bearish route on the security. Of the 15 analysts tracking the shares, 10 say they're a "hold" or worse.

Technically speaking, Tesla Motors Inc's (NASDAQ:TSLA) been in a rut. The stock has underperformed the broader S&P 500 Index (SPX) by nearly 20 percentage points during the past two months. What's more, TSLA has recently faced resistance in the form of its descending 40-day moving average. 

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