Unusual Option Activity: Tesla Motors (TSLA)

Electric vehicle manufacturer Tesla Motors (TSLA) is down 10 percent over the past year, as the company’s sales have slowed. One trader sees a further decline in the weeks ahead.

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  • That’s based on the March 22 $140 puts. With 35 days until expiration, 22,675 contracts traded compared to a prior open interest of 365, for a 62-fold rise in volume on the trade. The buyer of the puts paid $0.55 to make the bearish bet.

    Tesla shares recently traded for about $184, so the stock would need to drop about $44, or 26 percent, for the options to move in-the-money. Tesla would also need to break under its 52-week low of $152.37.

    Tesla has struggled a bit in the past year,  but earnings are up 115 percent, even with revenue growth of just 4 percent. Plus, Tesla sports a 15 percent profit margin, on the high end for a manufacturing-heavy industry.

    Action to take: Shares of the electric vehicle producer are in a downtrend, so interested investors may want to hold off until shares get closer to the $150 range before buying.

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  • For traders, the March $140 calls are unlikely to move in-the-money. But they should trend higher as shares continue to trend lower. And the options are inexpensive enough that they could have high double or low-triple-digit returns.


    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.