Tesla Call Options Fly Off the Shelves After Musk Tweet

TSLA stock is already pacing for its best month since 2014

Aug 7, 2018 at 2:32 PM
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It's been quite the afternoon for electric vehicle maker Tesla Inc (NASDAQ:TSLA). The stock shot higher on reports that a Saudi sovereign fund bought a stake of just under 5% in the company. Shortly thereafter, CEO Elon Musk took to Twitter to say he's "considering taking Tesla private at $420" -- a 23% premium to Monday's close at $341.99 -- and said the funding is "secured." When someone asked if he would retain control of the company, Musk responded, "I don't have a controlling vote now & wouldn't expect any shareholder to have one if we go private. I won't be selling in either scenario." Against this backdrop, TSLA options are flying off the shelves at breakneck speed.

TSLA stock was last seen 6.6% higher to trade at $364.47, and earlier flew as high as $371.15. The shares popped earlier this month after a stronger-than-expected earnings report, but the $360-$370 region has acted as a roadblock on several occasions in 2018. Already in August, Tesla stock has rocketed 22% higher -- set for its best month since February 2014.

tsla stock chart august 7

So far today, roughly 265,000 Tesla call options have changed hands -- three times the average intraday pace, and set for an annual high. Meanwhile, just over 150,000 TSLA puts have traded -- about twice the typical clip.

Weekly call options are dominant, accounting for the top nine most active contracts thus far. Most notably, it seems short-term bulls are buying to open weekly 8/10 370-, 365-, and 360-strike calls -- the most popular TSLA options thus far. By purchasing the calls to open, the buyers expect the shares to topple or extend their journey above the respective strikes by the close on Friday, Aug. 10, when the options expire.

This affinity for short-term call options represents a change of pace for Tesla. The stock's Schaeffer's put/call open interest ratio (SOIR) of 1.84 indicates that puts nearly double calls among options expiring within three months. Further, the stock's SOIR is in the 96th percentile of its annual range, suggesting near-term traders have rarely been more put-heavy in the past year.

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