Tesla Stock Higher on Musk's New Compensation Plan

Options traders have been increasingly bullish toward the electric car stock

Managing Editor
Jan 23, 2018 at 10:17 AM
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Shares of electric vehicle maker Tesla Inc (NASDAQ:TSLA) are higher after the company revealed CEO Elon Musk's new compensation plan, which is now tied to Tesla's market cap and operational milestones. In short, Musk won't get paid if TSLA stock doesn't perform.

Tesla stock was up 1.1% at $355.34, at last check, continuing its recent uptrend above the newfound support of its 252-day moving average (equivalent to roughly 52 weeks' worth of trading).

Daily Chart of TSLA Since Jan 2017 with 252MA

In the options pits, trader sentiment has been leaning towards the bulls' camp. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows TSLA sporting a 10-day call/put volume ratio of 1.40, ranking in the 93rd percentile of its annual range. This suggests that calls have been bought to open over puts at a faster-than-usual clip in the past two weeks.

Tesla stock's short interest fell more than 2.3% during the past two reporting periods, but still represents a hefty 25.5% of the stock's total available float. At TSLA's average daily trading volume, it would take more than six days for shorts to cover their bearish bets. Against this backdrop, it's possible that some of the recent call buying -- particularly at out-of-the-money strikes -- is attributable to shorts hedging their best with options.


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