Unusual Options Activity: Tesla Motors (TSLA)

Since surging to all-time highs over the past year, electric vehicle manufacturer Tesla Motors (TSLA) has seen prices slide, twice hitting a low of around $550 before bouncing higher. One trader sees the potential for another test of that low.

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  • That’s based on the July 23 $600 puts. With 39 days until expiration, over 4,230 contracts traded, a 42-fold rise in volume from the prior open interest of 101 contracts.

    The buyer of the puts paid about $41.30 for the contracts. With shares around $600, it would take a move down to a price of $550 or lower for the option to profit today’s buyer at expiration.

    Shares of the automaker have been weak in recent months. The company’s sales in China are down, an area that has been a huge driver in the past. And the semiconductor shortage is deeply impacting the automotive sector specifically. And the company’s CEO might be too distracted tweeting about altcoins and appearing on Saturday Night Live.

    Action to take: There’s potentially room for another drop. The chart suggests that $550 would be about the worst of it, and that shares may potentially be in a range. For those bearish on the stock, or who expect the market to continue sideways, there may be some quick double-digit profits buying the puts.

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  • In that low $550 range however, traders would be better off looking at long side trades for a likely bounce higher.

     

    Disclosure: The author of this article has no position in the stock mentioned here, and does not intend to make a trade this company after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.