Tesla Options Hot as Citron Goes Long Before Earnings

Tesla will report third-quarter earnings after tomorrow's close

Oct 23, 2018 at 2:47 PM
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The shares of Tesla Inc (NASDAQ:TSLA) have been volatile in recent months, per their 120-day historical volatility of 63.4% -- in the 99th annual percentile. Things are no different today, with the security up 10.2% to trade at $290.69, after Citron Research said it was long on TSLA stock.

The noted short seller set a $100 price target on Tesla back in early March, as the stock was tumbling toward its worst month in years. In a note earlier today, though, Citron said," Tesla is destroying the competition," and waxed optimistically on a number of things, including the electric carmaker's ability to raise cash and next year's Model 3 debut in European markets.

Citron's repositioning comes on the heels of last night's announcement that Tesla would report third-quarter earnings after the market closes tomorrow, Oct. 24, about a week earlier than previously expected. While most of TSLA's earnings reactions over the last eight quarters have been negative, the stock gapped 16.2% higher the day after its early August results, eventually topping out at an annual high of $387.46 on Aug. 7 -- courtesy of CEO Elon Musk's infamous go-private tweet.

tsla stock daily chart oct 23

This busy backdrop has sparked a rush of activity in Tesla's options pits today, with around 207,000 calls and 141,000 puts on the tape so far -- about 1.9 times the average daily pace of trading. The November 310 call is most active with 18,188 contracts traded so far. New positions are being initiated here, with the bulk of the action centered across several spreads.

This front-month strike has been popular, though, and has seen one of the biggest increases in open interest over the last 10 days. Data from the major options exchanges confirms at least some buy-to-open activity here, suggesting speculators are betting on TSLA swinging back above $310 by November options expiration.

While some of this action could be of the traditional bullish kind, it's also likely short sellers have been using long calls to hedge against any upside risk. The 33.63 million Tesla shares sold short represent 26.4% of the equity's available float, or 3.1 times the average daily pace of trading.


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