Tesla Options Bear Targets Multi-Year Lows By June

Action in recent months has been more bullish, though

Mar 6, 2018 at 3:09 PM
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Tesla Inc (NASDAQ:TSLA) is trading down 1.2% at $329.25, amid broad-market headwinds and reports Porsche unveiled a Model X rival and Uber's fleet of self-driving trucks is now moving freight in Arizona. Whatever the reason, options traders are betting on even bigger losses, with TSLA stock's single-day put/call volume ratio last seen at a top-heavy 1.36 -- pacing in the 100th annual percentile.

By the numbers, 52,963 puts and 38,879 calls have traded so far. Most notably, it looks as if one trader sold to close 8,021 April 200 puts while simultaneously buying to open a same-sized block of June 180 puts. Trade-Alert echoes the theory of a bearish roll down and out, suggesting this speculator is bracing for a sharp sell-off in TSLA shares over the next three months. In fact, the last time Tesla traded below $180 was in November 2016.

Widening the scope reveals it's been call buyers who have been busier than usual in TSLA's options pits in recent months. 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 1.28 ranks in the 88th percentile of its annual range.

And while it's likely some of this activity is a result of speculators targeting upside for the auto stock, it's also possible a portion of the call buying is due to short sellers initiating an options hedge. Nearly 29.40 million TSLA shares are currently sold short, accounting for 23.45% of the stock's available float, or 4.7 times its average daily pace of trading.

Regardless, Tesla call options are currently pricing in low volatility expectations relative to their put counterparts. This is seen in the stock's 30-day implied volatility skew of 11.9%, which is docked in the 95th annual percentile.

On the charts, TSLA has struggled since topping out at a record high of $389.61 in late September. And while the shares have been bouncing between support at $300 and resistance at $360 in the months since touching this notable milestone, they were last seen testing their 50-week moving average -- a trendline that's served as a magnet since early November.

Looking ahead, Tesla will be in focus at the end of the month, with a special shareholders meeting scheduled for Wednesday, March 21, to decide the fate of CEO Elon Musk's massive compensation package. The proposal has already been approved by Tesla's board of directors.


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