Unusual Options Activity: Tesla Motors (TSLA)

Multiple options trades imply shares will decline again.

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.

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  • 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.

    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.