Tesla Motors Inc (TSLA) Call Options Heat Up After Musk Tweet

Tesla Motors Inc (NASDAQ:TSLA) weekly call options are hot after Elon Musk tweeted of a product announcement

Aug 23, 2016 at 12:46 PM
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The shares of electric vehicle maker Tesla Motors Inc (NASDAQ:TSLA) are picking up steam, after Tesla CEO and prolific tweeter Elon Musk said the company will make a product announcement at 3 p.m. ET ("noon California time") -- and despite a new partnership to develop self-driving cars between Delphi Automotive PLC (NYSE:DLPH) and former TSLA comrade Mobileye NV (NYSE:MBLY). TSLA was last seen 2.1% higher at $227.70, and options volume has escalated since the tweet, particularly on the call side.


In the past 45 minutes, TSLA call volume has gone from about 19,000 to 35,000 contracts, which is 1.3 times the average intraday clip. Put volume, meanwhile, has jumped by just about 3,000 contracts during the same time frame, with 21,000 puts traded so far -- in the normal range.

Weekly calls expiring at Friday's close account for the three most active options, and half of the top 10 most popular contracts thus far. It looks like some traders are buying to open the weekly 8/26 227.50- and 230-strike calls, to bet on an extended rally beyond the strikes by the end of the week.

However, today's appetite for long calls marks a shift from the recent norm. The equity's 10-day put/call volume ratio on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) sits at 1.04 -- higher than 68% of all other readings from the past year. In other words, speculators have been buying to open TSLA puts over calls at a faster-than-usual pace during the past two weeks.

The stock's Schaeffer's Volatility Index (SVI) rests at an annual low of 28%, meaning now is an opportune time to buy TSLA's near-term options, historically speaking. Plus, prior to the Musk tweet, the equity's 30-day at-the-money implied volatility hit a 52-week low.

It's been a rocky 2016 for Tesla Motors Inc (NASDAQ:TSLA), with the shares exploring a range of more than 125 points in short order -- going from a two-year low of $141.05 in February to a multi-month high just south of $270 by early April. The security subsequently dropped to the $190 region -- a 61.8% Fibonacci retracement of the aforementioned rally -- in late June, as traders jeered Tesla's proposed acquisition of fellow Musk-run SolarCity Corp (NASDAQ:SCTY). Since then, however, TSLA has motored back above the $220 vicinity -- which marks a 38.2% Fibonacci retracement of that rally -- despite "autopilot" controversy.


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