Options Heat Up as Tesla Motors Inc (TSLA) Snaps Cold Spell

Tesla Motors Inc (TSLA) could post its first daily win since the automaker offered to buy SolarCity Corp (SCTY)

Jun 27, 2016 at 2:51 PM
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Tesla Motors Inc (NASDAQ:TSLA) is bucking the broad-market trend lower, up 0.6% at $194.30. If the stock can carry these gains through the close, it would represent the first positive session since the electric automaker offered to buy SolarCity Corp (NASDAQ:SCTY) -- a move widely panned across Wall Street. Amid the upbeat session, TSLA options players are trading at a slightly accelerated rate.

Taking a quick step back, it's not exactly clear why Tesla's bouncing back. However, according to at least one report, the company raised additional funds toward building a "Gigafactory" by selling $20 million worth of tax credits to MGM Resorts International (NYSE:MGM).

As alluded to, TSLA options are crossing the tape at a faster-than-usual clip, with 91,000 contracts traded versus an expected 72,000. Looking more closely, potential buy-to-open activity is detected at a number of strikes in the weekly 7/1 series -- which account for nine of the 10 most popular strikes.

Slightly longer-term traders may be buying to open TSLA's July 230 call, expecting over 18% upside between now and July expiration. Historically speaking, the shares traded above $230 as recently as June 9, but due to the ensuing sell-off, delta on the out-of-the-money option is just 0.06, or 6%. As such, it's possible these call buyers may be short sellers attempting to hedge against a surprise short-term rally -- especially since 27% of the stock's float is sold short.

Generally speaking, when it comes to traders targeting near-the-money Tesla Motors Inc (NASDAQ:TSLA) options in the July series, there's a pronounced preference toward puts over calls. Specifically, the stock's front-month gamma-weighted Schaeffer's put/call open interest ratio (SOIR) sits at 2.09, with puts more than doubling calls.

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