Last-Minute Traders Target Tesla Motors Inc (TSLA) After 'Master Plan' Reveal

Tesla Motors Inc (TSLA) is sliding on the charts, as traders react to Elon Musk's "master plan"

by Kirra Fedyszyn

Published on Jul 21, 2016 at 2:37 PM
Updated on Jun 24, 2020 at 10:16 AM

After more than a week of keeping investors guessing on the details of his mysterious "master plan," Tesla Motors Inc (NASDAQ:TSLA) CEO Elon Musk last night revealed his ambitions in a blog post he called "Master Plan, Part Deux." The key elements of Musk's plan include developing solar roofs with integrated batteries, expanding Telsa's vehicle line, making self-driving vehicles "10 times safer" than manual driving, and developing a car-sharing system. Predictably, critics are out in force, as are options traders -- with speculators busy picking up last-minute bets.

Specifically, in the words of one Barclays analyst, Musk's plan is "long on exciting visions of the future and short on financial details." Meanwhile, S&P Global went a step further, cutting its opinion on the stock to "sell" from "hold." As such, shares of TSLA are sitting 3.7% lower at $219.90.

Separately, TSLA options are changing hands at a faster-than-expected rate this afternoon, with calls narrowly outpacing puts. Traders are targeting the weekly 7/22 series, which expires at tomorrow's close, and accounts for all of the stock's 10 most active options. According to data at the International Securities Exchange (ISE), bullish speculators are buying to open the weekly 7/22 230-strike call -- TSLA's most active option, with roughly 10,500 contracts on the tape.

Taking a step back, near-term traders have been more call-skewed than usual toward TSLA of late. The stock's Schaeffer's put/call open interest ratio (SOIR) of 1.05 sits lower than 64% of the past year's readings. And for those buying to open short-term positions, now is an attractive time to pick up premium. The equity's Schaeffer's Volatility Index (SVI) of 52% ranks in the low 19th annual percentile -- indicating historically low volatility expectations are being priced in.

Outside of the options pits, pessimism has surrounded TSLA recently. Short interest climbed by 9% over the two latest reporting periods, and now represents nearly 30% of the stock's total float. At TSLA's typical pace of trading, it would take almost a week to cover all these bearish positions. The brokerage bunch seems to be similarly aligned, with 12 out of 16 analysts rating the stock a "hold" or worse.

TSLA hasn't had much to brag about lately, underperforming the broader S&P 500 Index (SPX) by more than 13 percentage points over the past three months. In fact, the shares have given up 17.9% year-over-year. Looking more closely, while Tesla Motors Inc (NASDAQ:TSLA) recently took back a familiar level of support at its 30-week moving average, the stock is testing the round $220 level.

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