Tesla Stock Call Options Hot After New High

TSLA CEO Elon Musk said he would withdraw from White House councils if Trump pulls out of Paris Climate Accord

May 31, 2017 at 3:50 PM
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Shares of Tesla Inc (NASDAQ:TSLA) topped out at a record high of $342.89 earlier. This came even after Morgan Stanley defended its mid-May TSLA stock downgrade, saying it's a "pause for breath." At last check, Tesla shares were trading up 0.8% at $337.84, and options traders are showing a clear preference for calls over puts. In fact, TSLA's single-day put/call volume ratio is perched at 0.70, and set to settle the session in the low 12th annual percentile.

Specifically, 122,153 calls and 85,819 puts have traded so far, roughly 1.4 times the expected intraday rate. Most active is the weekly 6/2 340-strike call, where it looks as if options traders may be purchasing new positions. If this is the case, the goal is for TSLA to rally back above $340 by this Friday's close, when the weekly series expires.

Today's call-skewed session is just more of the same for TSLA options traders, though. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day call/put volume ratio of 1.23 ranks in the 81st percentile of its annual range. In other words, calls have been bought to open over puts at a faster-than-usual clip.

Given Tesla's impressive technical backdrop, it's likely most of this activity is due to "vanilla" options traders. However, with more than 26% of TSLA stock's float sold short, it's possible some of the action is a result of shorts hedging against any additional upside risk. Regardless, Tesla shares could get a boost once short sellers start covering, since it would take almost a week to cover these bearish bets, at the average pace of trading.

Looking ahead, Tesla stock could draw some attention after President Donald Trump announces whether or not he will pull out of the Paris Climate Accord. Specifically, TSLA CEO Elon Musk tweeted earlier that he may be forced to resign from several White House economic advisory councils should Trump withdraw from the global climate initiative.

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