Skepticism Builds on Tesla Motors Inc (TSLA) Ahead of Model 3 Reveal

Tesla Motors Inc (NASDAQ:TSLA) will unveil its low-priced Model 3 sedan today

by Karee Venema

Published on Mar 31, 2016 at 10:33 AM
Updated on Jun 24, 2020 at 10:16 AM

All eyes are on Elon Musk's Tesla Motors Inc (NASDAQ:TSLA) today, with the company set to unveil the prototype for its Model 3 electric car. Priced at $35,000, it is the least expensive vehicle in Tesla's electric car lineup. Ahead of the highly anticipated reveal, shares of TSLA are up 0.1% at $227.16 -- and options traders are betting on a big post-event retreat.

Specifically, TSLA's weekly 4/1 200-strike put saw the biggest rise in open interest yesterday, and it looks as if new positions were purchased. By buying to open the puts, traders expect the stock to breach $200 by tomorrow's close, when the weekly series expires.

Meanwhile, in today's trading, TSLA's weekly 4/8 230-strike put appears to be seeing some buy-to-open activity. In other words, speculators are betting on TSLA to settle south of $230 when the options expire at next Friday's close.

Widening the sentiment scope reveals options traders have shown a preference for long puts over calls in recent months. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), for instance, TSLA's 50-day put/call volume ratio of 1.05 rests in the 94th percentile of its annual range. In other words, puts have been bought to open over calls at a near-annual-high clip.

This skepticism is evident outside of the options arena, as well. In fact, short interest edged up 2.3% in the two most recent reporting periods, and now accounts for nearly 32% of TSLA's available float -- or 6.9 times the average daily trading volume. Elsewhere, eight of the 14 analysts covering TSLA maintain a "hold" or worse rating.

This pessimism seems unwarranted, given Tesla Motors Inc's (NASDAQ:TSLA) recent technical showing. Since bottoming at a two-year low of $141.05 on Feb. 9, TSLA has rallied 61%. Should the shares extend this bounce, an unwinding of the skepticism both in and out of the options pits could translate into fresh tailwinds for TSLA.

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