Tesla Stock Sees Options Rush Ahead of Earnings

Tesla Inc (NASDAQ:TSLA) stock has seen an influx of options trading in recent weeks, according to data from Schaeffer's Senior Quantitative Analyst Rocky White. Specifically, TSLA options have been some of the most active in the last 10 sessions, with 361,493 calls and 328,568 puts traded on the shares. While the now-expired weekly 2/10 270-strike call saw the heaviest volume over this time frame -- with 34,333 contracts traded -- the February 280 call is a close second, with 29,612 contracts crossing the tape.

Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) confirms a healthy dose of buy-to-open activity at the front-month strike. In other words, by initiating the long calls, options traders expect the shares to settle above $280 by expiration at tomorrow's close -- territory TSLA stock explored earlier this week, when it hit a two-year high of $287.39. The February series is popular today, too, with each of TSLA's 10 most active options expiring tomorrow night.

Widening the scope reveals that call buying has been popular at the major options exchanges for some time. In fact, TSLA's 50-day ISE/CBOE/PHLX call/put volume ratio of 1.12 ranks just 4 percentage points from a 52-week peak. Simply stated, long calls have been initiated relative to puts at a near-annual-high clip over the last 10 weeks.

While a "vanilla" positioning by call buyers wouldn't be surprising given TSLA's long-term technical trajectory, it's also possible that short sellers have been purchasing calls to hedge their bearish bets against any additional upside risk. Short interest accounts for a whopping 29.1% of TSLA's available float, or 7.4 times the stock's average pace of trading. With TSLA lingering near new highs, a capitulation from some of the weaker bearish hands could translate into bigger gains for the shares.

TSLA could also stand to benefit from a well-deserved round of bullish brokerage notes. While 14 of 17 analysts maintain a "hold" or worse rating on the shares, the average 12-month price target of $248.73 stands at a discount to the stock's current perch. Today, in fact, UBS reiterated its "sell" recommendation on the shares, saying expectations are too lofty ahead of Tesla's earnings report, due out after next Wednesday's close. Additionally, the brokerage firm said it is struggling to "understand the run-up" in the stock.

In fact, while the shares are trading down 3.1% at $271 today on news the United Auto Workers have sent representatives to Tesla Inc's (NASDAQ:TSLA) Fremont, California, plant to help workers organize, they remain 27% higher year-to-date. Longer term, TSLA stock has rallied 61% year-over-year. Plus, if past is precedent, Tesla shares could get a boost after next week's earnings report. In the last eight quarters, the stock has moved higher in the session subsequent to reporting five times.

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