Option Bears, Short Sellers Pile on Tesla Motors Inc (TSLA)

Tesla Motors Inc (TSLA) option bears and short sellers have been active in recent weeks

Dec 12, 2016 at 12:27 PM
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Tesla Motors Inc (NASDAQ:TSLA) is making headlines, and could remain in focus over the next few weeks. The electric automaker reached a settlement in its lawsuit in Norway, which alleged TSLA had overstated the horsepower of its Model S P85D. Furthermore, Tesla CEO Elon Musk will reportedly be present for Donald Trump's roundtable with tech CEOs on Wednesday, which will include guests such as Larry Page, Sheryl Sandberg, Satya Nadella, and Tim Cook, among others. TSLA is also ramping up ahead of its gigafactory tour, scheduled for Jan. 4. As TSLA gears up for a busy few weeks, option bears and short sellers have been more active than usual.

In TSLA's option pits, put open interest ranks in the 98th percentile of its annual range, after hitting an annual peak on Friday. TSLA's 10-day put/call volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) sits at 1.20, higher than 92% of all other readings from the past 12 months, indicating a healthier-than-usual appetite for bearish bets during the last two weeks. What's more, TSLA's Schaeffer's put/call open interest ratio (SOIR) of 1.74 sits just 4 percentage points from an annual peak, indicating a stronger-than-usual put-bias among near-term option players.

Option traders aren't the only ones with reservations about TSLA's future performance. Short sellers are also piling on, with TSLA's short interest up 23.9% over the last two reporting periods. Shorted shares now account for 29.7% of TSLA's float -- an amount that would take more than eight days of trading to cover, at TSLA's average daily volume. Analysts also seem cynical towards TSLA, with 14 of 17 rating the shares a "hold" or worse. Recently, Deutsche Bank resumed overage of TSLA with a "hold," and cut its price target to $215 from $290.

So far today, though, TSLA is in the black, with the shares up 0.4% at $193.01. However, the stock has lost more than 19% this year, and has been ushered lower by its 50-day moving average since August.  Pullbacks could find a floor in the $180-$190 neighborhood, which has provided support on several occasions over the past couple of years.

Now looks like an opportune time to buy Tesla Motors Inc (NASDAQ:TSLA) options. The most "vanilla" option buyers stand to lose is the initial premium paid, and TSLA's short-term premiums are currently on the more modest side. TSLA's Schaeffer's Volatility Index (SVI) of 35% sits in just the 8th percentile of its annual range, indicating option players are pricing in relatively muted volatility expectations over the near term.

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