Tesla Stock Driving Toward Huge Day

TSLA calls are popular today after the SEC settlement

Patrick Martin
Oct 1, 2018 at 2:56 PM
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It's been a wild ride for the shares of Tesla Inc (NASDAQ:TSLA) recently, and it's continuing today, with the stock up 16.3% to trade at $307.93. This comes after CEO Elon Musk settled with the Securities and Exchange Commission (SEC) by agreeing to step down as head of Tesla's board, and pay $20 million. The SEC was pursuing a lawsuit on securities fraud charges from when Musk tweeted about taking Tesla private for $420 per share back in August. 

Helping power today's surge is news from Electrek that Tesla produced 80,000 vehicles in the third quarter, a new record high. Plus, Musk sent a letter out employees saying the company is close to being profitable. The shares are on track for their best day since December 2013, but are still trading below their year-to-date breakeven level.

Daily Stock Chart TSLA

Looking toward options, traders have been extremely bearish in recent weeks. This is per data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which shows the electric car maker with a 10-day put/call volume ratio of 1.04, ranking in the 88th percentile of its annual range. In other words, during the past two weeks, puts have been purchased over puts at a faster-than-usual clip.

Echoing this put-heavy sentiment is the stock's Schaeffer's put/call open interest ratio (SOIR) of 2.03, which ranks in the 86th percentile of its annual range. In other words, put open interest outweighs call open interest among contracts expiring within three months.

Shifting gears to today, though, calls are more popular. Nearly 170,00 calls have been traded -- double what's typically seen at this point in the day, with volume in the 96th annual percentile. Much of the action came from two blocks of 4,000 calls at the October 350 and 325 strikes. It appears a trader may have initiated a short call spread, and expects TSLA stock to stay below $325 over the next few weeks.


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