Unusual Options Activity: Tesla Motors (TSLA)

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  • Multiple options trades imply shares will decline again.

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  • Multiple bets are being made that shares of Tesla Motors (TSLA) will drop again in the coming weeks.

    On Monday, over 10,000 contracts traded on an August $60.00 put—a 75 percent discount from where shares trade around $240. Another large trade occurred on the October $215 put, which implies a 10 percent discount between now and October.

    The August put, trading at $0.04, or $4 per contract, is a very cheap bet likely to expire worthless. But if Tesla shares drop quickly at some point in the next 31 days, the option could get a large percentage bounce.

    The October put options, which expire in 94 days, traded for around $12.68, or $1,268 per contract. They may have a smaller percentage move, but investors could still make a quick profit if shares drop heavily in the coming days.

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  • Action to take: Tesla Motors has surprised on the upside lately on record deliveries. Given how those deliveries occurred from an increase in lower-end production however, and how sensitive the stock is during market selloffs, the October $215 trade looks like an attractive bet as a short-term market hedge.

    Traders should look at the October $215 options, provided they don’t pay over $12.90 for the option. Traders should look to take a quick 20-30 percent profit before the time premium starts to work heavily against the trade.