Last-Minute Option Skeptics Swarm Tesla Motors Inc (TSLA)

Call sellers predict Tesla Motors Inc will remain below $230 through tonight's close

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Published on Dec 5, 2014 at 10:39 AM
Updated on Jun 24, 2020 at 10:16 AM

Tesla Motors Inc (NASDAQ:TSLA) has been a technical marvel in 2014, sporting a more than 50% year-to-date lead at $226.02. However, that didn't prevent one group of option traders from banking on a short-term technical ceiling for shares of the electric car maker.

Jumping right in, a number of last-minute traders hit the options pits yesterday, as nine of TSLA's 10 most active strikes will expire tonight. Leading the way was the weekly 12/5 230-strike call, where 7,755 contracts were exchanged. However, a solid proportion of these bets weren't of the "vanilla" variety.

The majority of the 230-strike calls traded at the bid price, suggesting they were sold. Plus, open interest added 1,001 positions overnight, making it safe to assume fresh wagers were placed -- a theory partially confirmed by the International Securities Exchange (ISE). In other words, these call writers anticipate TSLA will churn below $230 through tonight's close -- allowing the contracts to expire worthless, and the speculators to retain the initial premium received as their maximum potential profit.

A closer look at the charts reveals that Tesla Motors Inc (NASDAQ:TSLA) -- while still a technical beast -- has struggled in recent weeks. While the shares have gotten a recent lift from their 40-week moving average, they are now sitting below this trendline (located at $231.19), which could be switching roles to act as resistance.


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