Unusual Options Activity: Tesla Motors (TSLA)

Electric car manufacturer Tesla Motors (TSLA) has been out of favor with the markets in recent weeks. At least one trader sees further short-term weakness.

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  • That’s based on a number of unusual options trades. The June 11 $480 put is one such trade. Over 3,580 contracts traded from a prior open interest of 180, for a 20-fold rise in volume. The buyer of the option, which expires in 21 days, paid about $7.95 for the contract.

    With shares around $565, shares would need to drop another 15 percent in under a month for the trade to move in-the-money.

    Shares of Tesla are at a six-month low following a massive rally in 2019 and 2020. Shares peaked at around $900 in late January, so they’re already down from their all-time high by nearly one-third.

    The company has also been stockpiling production thanks to shortages for key parts, including those of automotive semiconductor chips.

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  • Action to take: It’s possible that shares bounce from here, as they’re at their most oversold levels since early March when they bounced before. However, odds are working against the company at this point, and a further decline from here looks likely.

    Given the multiple short-term bearish bets on the company, this trade looks good for a quick mid-double-digit profit on the short side. Given the market volatility of the past few weeks, that’s a reasonable trade to make now.


    Disclosure: The author of this article has no positions in the stock mentioned here, but may make a trade on this company after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.

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