Tesla Stock Pops on Stock Split Announcement

Traders are flocking toward TSLA calls today

Deputy Editor
Aug 12, 2020 at 10:37 AM
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The shares of Tesla Inc (NASDAQ:TSLA) are surging this morning, after the electric car company announced a five-for-one stock split in the hopes of making its shares more accessible to its employees and investors. Extra shares of TSLA will be issued on August 28 to shareholders of record on August 21, while split-adjusted trading will begin on the last day of the month. As a result, the shares of Tesla stock were last seen up 7.1% to trade at $1,471.45.

As noted in our quantitative breakdown of stock splits from Schaeffer's Senior Quantitative Analyst Rocky White, average returns tend to be higher after stock splits with equities that analysts are generally pessimistic toward. That's good news for TSLA, considering 17 of the 24 brokerages in coverage rate the security a "hold" or worse.

After three consecutive sessions in which TSLA closed lower, the shares have now bounced off their supportive 40-day moving average. Though it's still down considerably from its July 13 all-time high of $1,794.99, Tesla stock boasts a staggering 526% year-over-year lead. 

The options pits show a strong preference for calls. Tesla stock's Schaeffer's put/call open interest ratio (SOIR) of 1.64 sits in the 12th annual percentile, showing there is an unusual call-skew in the front three-months' series.

Today, options bulls are piling on some more. Calls are trading at double the average intraday amount, with volume pacing in the 95th percentile of its annual range. New positions are being opened at the weekly 8/14 1,500-strike call. Running in second is the weekly 8/14 1,600-strike call, followed by the 1,400-strike put from the same series.

The good news for options traders is that premium can be had for a bargain. The security's Schaeffer's Volatility Index (SVI) of 62% is in the 24th percentile of its annual range, meaning options players are pricing in relatively low volatility expectations right now. 


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