Tesla Stock On Track for Worst Month Since 2010

TSLA options traders are growing bearish

by Patrick Martin

Published on Mar 28, 2018 at 10:13 AM

Tesla Inc (NASDAQ:TSLA) stock is dropping again today, down 6.3% at $261.60, and just off a new annual low of $260.89. It's been a rough stretch lately for TSLA stock, on track for its worst weekly loss since July 2017, and its steepest monthly loss since December 2010. The shares sank yesterday after Citi Research waxed pessimistic on next week's Model 3 update, and on news of a federal investigation into a fatal Tesla vehicle crash. Today, the stock is down after Moody's downgraded the firm's credit rating.

However, Morgan Stanley thinks TSLA's dip could represent a buying opportunity for some. Still, the brokerage firm said Alphabet's (GOOGL) Waymo agreement with Jaguar poses a challenge to Tesla's autonomous driving leadership, and that while it expects the much-publicized Model 3 bottleneck to be mitigated, it doesn't expect a run rate of 5,000 a week until late this year.

In the options pits, puts continue to creep up on calls. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows TSLA with a 10-day put/call volume ratio of 0.96, ranking in the 90th percentile of its annual range. This shows that during the past two weeks, puts have been purchased over calls at a much faster-than-usual clip.

What's more, TSLA's stock's Schaeffer's put/call open interest ratio (SOIR) of 1.68 ranks in the 98th percentile of its annual range, indicating a heavier-than-normal put-skew among options expiring within three months. In the April series, the deep out-of-the-money 200-strike put is most popular, with more than 8,800 contracts outstanding.

It's getting pricey to buy premium on Tesla stock, however. Its 30-day at-the-money implied volatility of 65.9% ranks in the 100th annual percentile, and its Schaeffer's Volatility Index (SVI) of 58% sits above 86% of all similar readings taken in the last 12 months. These two indicators suggest elevated volatility expectations are being priced into short-term options.

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