Inside the Heavy Call Volume on Tesla Stock

Calls are the options of choice on TSLA, while short-term premiums are cheap on NFLX

Managing Editor
Aug 7, 2017 at 3:52 PM
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Option volume has been notably heavy lately on electric car manufacturer Tesla Inc (NASDAQ:TSLA) and FAANG stock Netflix, Inc. (NASDAQ:NFLX), with call traders driving the action on TSLA and bulls and bears jockeying for control of NFLX. Here's a quick look at how options traders have been placing their bets on these two popular names. 

The 20 stocks listed in the table below have attracted the highest total options volume during the past 10 trading days. Data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White.

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Short-Term TSLA Call Options in Play

As the electric automaker kicks off the road show for its first-ever junk bond offering, Tesla stock is down 0.2% to trade at $356.33. News of the fundraising effort is generally overshadowing a less-than-enthusiastic Barron's write-up over the weekend, with the financial publication urging readers to "buy the car, not the stock."

In the options pits, the tone is considerably more bullish. In addition to the call skew displayed in the table above, data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows TSLA with a 50-day call/put volume ratio of 1.19, which ranks in the 95th percentile of its annual range. 

Today, weekly 8/11 calls are seeing notable action, with the 360- and 370-strike calls accounting for the two most active strikes as we approach the close. Buyers of these out-of-the-money calls are betting on TSLA stock to rally back into record-high territory by the end of the week.

Alternately, short-term call buyers could be Tesla bears looking to hedge their bets. Short interest totals nearly 28 million shares, and represents 23% of the stock's total available float.

TSLA has added 66% year-to-date, though it's pulled back considerably from its June 23 record high of $386.99. The rapid decline off that peak was contained by support at the stock's 100-day moving average, which previously capped the October 2016 highs, and last Friday TSLA settled for the first time back above its July 3 pre-bear gap close.

Options Traders Split on Netflix

NFLX is currently up 0.7% to trade at $181.45, after the streaming entertainment company purchased comic book publisher Millarworld for an undisclosed amount. While the stock is fresh off its July 21 record high of $191.50, though, options traders can't seem to decide how they feel about NFLX.

Per the table above, NFLX put and call volume have been in near parity over the past 10 days. And ISE/CBOE/PHLX data shows NFLX with a 10-day put/call ratio of 0.87, which ranks in the 70th percentile of its annual range -- so, while calls bought to open have outnumbered puts on an absolute basis, bullish bets have actually been less popular than usual, relative to their bearish counterparts.

Regardless of the directional bias, now is an opportune time to purchase Netflix options. NFLX's Schaeffer's Volatility Index (SVI) of 27% ranks higher than just 11% of all other readings from the past year, suggesting that near-term options are pricing in relatively low volatility expectations.

Meanwhile, analysts remain firmly upbeat on NFLX, which has tacked on 87% over the past year. Of the 30 brokerages covering Netflix, 19 rate it a "buy" or better.

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