Overbought Tesla Motors Inc (TSLA) Hit By Option Bears

Tesla Motors Inc (NASDAQ:TSLA) is moving lower after hitting overbought territory, and option traders are taking action

by Josh Selway

Published on Mar 23, 2016 at 1:53 PM
Updated on Mar 23, 2016 at 4:15 PM

Both call and put volume are accelerated today on Tesla Motors Inc (NASDAQ:TSLA). Most option traders are taking a short-term approach to the electric automaker, with the weekly 3/24 series accounting for nine of the stock's 10 most popular strikes. In the lead is the 230-strike put, and it looks like traders are opening bearish positions here in the hopes of TSLA extending its losses below $230 before week's end, when the contracts expire. 

Bearish betting is nothing new from the stock's speculators. For instance, TSLA sports a 50-day put/call volume ratio of 1.08 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This reading arrives in the 98th percentile of its annual range

TSLA is also a favorite among short sellers, with over one-third of the stock's float sold short, after another 12.4% increase during the past two reporting periods. In fact, short interest on TSLA currently stands at an all-time high. At the stock's average daily trading volumes, it'd take close to seven days for shorts to cover. 

The shares had been gaining ground since bottoming around $141 in early February, but TSLA topped out just below $240 on Monday -- an area that gave the stock trouble in December, as well -- and has moved lower over the past two days. This could be because TSLA's 14-day Relative Strength Index (RSI) shot up to 73 amid its recent hot streak, meaning the stock entered overbought territory and was theoretically due for a pullback. Even more concerning, VP John Douglas Field and Director Kimbal Musk recently filed to sell $652,400 and $2.8 million worth of TSLA shares, respectively, according to a Securities and Exchange Commission (SEC) filing released last night. Today, Tesla Motors Inc's (NASDAQ:TSLA) 2.7% loss puts the stock at $227.97 -- just below its 200-day moving average

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