Tesla Motors Inc (TSLA) Calls Pick Up Ahead of Mystery Event

Tesla Motors Inc (TSLA) could reveal details on the Model 3 tomorrow

Oct 18, 2016 at 2:39 PM
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Ahead of tomorrow's mystery event, Tesla Motors Inc (NASDAQ:TSLA) is 1.7% higher at $197.31, and its options are trading at 1.2 times the expected intraday pace. Naturally, speculation is heating up about what CEO Elon Musk could reveal on Wednesday, with the possibilities including the release of Autopilot 2.0 or details on the Model 3's dashboard. Speaking of the Model 3, TSLA recently told prospective buyers that new orders for the sedan won't ship until mid-2018, at the earliest.

Turning to the options pits, the October series is highly popular, accounting for all but one of the 10 most active strikes. Digging deeper, the 202.50 call occupies the top spot, and International Securities Exchange (ISE) data confirms the vast majority of the contracts have been bought to open. By purchasing these out-of-the-money (OOTM) calls, traders foresee TSLA toppling $202.50 by Friday's close, when the front-month series expires.

Of course, call buying isn't anything new for Tesla options traders. During the past two weeks, speculators at the ISE, Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have picked up roughly 46,000 calls. Moreover, the stock's 10-day call/put volume ratio of 1.10 ranks in the call-tilted 62nd annual percentile. Underscoring this call bias is TSLA's Schaeffer's put/call open interest ratio (SOIR) of 0.92, which sits in the low 15th percentile of its 12-month range -- indicating open interest in the front three-months' series is more call-skewed than usual.

That's not to say everyone's a fan of TSLA. In fact, nearly 24% of the stock's total float is sold short. At the equity's average daily trading pace, it would take just over two weeks to buy back these positions. Also falling on the skeptical side of the aisle are analysts, with 14 of 17 doling out a "hold" or worse assessment.

Lately, Tesla Motors Inc (NASDAQ:TSLA) has done little to dispel these doubts. Since topping out just shy of $270 in early April, the shares have surrendered close to 27% of their value. Not to mention, TSLA stock recently gave up its perch atop the round-number $200 level. Given this dismal technical backdrop and high short-interest levels, it's possible some of the aforementioned call buyers -- especially those targeting deep OOTM strikes -- could be short sellers seeking an upside hedge.

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