Tesla Motors Inc (TSLA) Shorts Scramble on Musk's Warning

Tesla Motors Inc (NASDAQ:TSLA) CEO Elon Musk tweeted that it was "probably unwise" for traders to short TSLA

Apr 6, 2016 at 2:22 PM
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During a Q&A session on Twitter Inc (NYSE:TWTR) yesterday, Tesla Motors Inc (NASDAQ:TSLA) CEO Elon Musk said that it is "probably unwise" for someone to short TSLA stock. Today, the shares are soaring -- up 3.5% at $264.26 -- amid a possible short-squeeze, and options traders are scrambling to bet on the stock's end-of-week trajectory.

Diving right in, TSLA call options and put options are trading at two times the average intraday pace today, with a collective 207,217 contracts on the tape thus far -- near the top percentile of its annual range. The weekly 4/8 series is hot, accounting for six of TSLA's 10 most active options.

Short-term speculators from both sides of the aisle are targeting the $260 mark on TSLA, with buy-to-open activity detected at the stock's weekly 4/8 260-strike call and put. Those purchasing new calls are betting on TSLA to extend today's rally through Friday's close -- when the weekly series expires -- while those buying to open the puts expect the stock to fall back below $260 by week's end.

Widening the sentiment scope reveals call buyers have had the upper hand in TSLA's options pits in recent weeks. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day call/put volume ratio of 1.18 ranks in the 71st annual percentile.

Outside of the options arena, though, the skepticism toward TSLA is stifling. In fact, short interest accounts for nearly 32% of the stock's available float -- or 6.9 times the average daily volume. As such, it's entirely possible that not only is today's burst due to some of the weaker shorts jumping ship, but a portion of the recent call buying may be of the protective kind.

Technically, TSLA has been burning shorts since bottoming at a two-year low of $141.05 on Feb. 9, up more than 87%. More recently, the stock has been buoyed by jaw-dropping Model 3 orders. Thanks to today's surge, shares of Tesla Motors Inc (NASDAQ:TSLA) are on pace to notch their loftiest daily close since Aug. 5.

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