Tesla Motors Attracts Short-Term Option Bears

Schaeffer's Investment Research
  JAN 16, 2013 4:12 PM

TSLA skeptics are scooping up puts at an annual-high clip.


The shares of Tesla Motors Inc. (NASDAQ:TSLA) have spent the past few weeks dawdling north of support in the $33-$33.50 neighborhood, but it looks like some options traders are anticipating a break to the downside -- and sooner, rather than later.

During the course of Tuesday's session, the automaker saw roughly 6,500 puts cross the tape -- almost twice the number of calls traded, and more than three times its average daily put volume. Most popular was the January 2013 32-strike put, which saw close to 2,400 contracts exchanged. The majority of the puts traded at the ask price, and open interest soared overnight, pointing to buy-to-open activity.

By purchasing the puts to open, the buyers expect TSLA to breach the $32 marker by the closing bell on Friday, when January-dated options expire. More specifically, the puts crossed at a volume-weighted average price (VWAP) of $0.14, meaning the buyers will make money if TSLA falls beneath the $31.86 level (strike minus VWAP) by the end of the week. However, even if TSLA remains north of familiar support, the buyers' maximum risk is the initial net debit.

Expanding our sentiment scope, we find that yesterday's preference for puts is just more of the same for TSLA. During the past two weeks, traders on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open nearly three puts for every call. In fact, the stock's 10-day put/call volume ratio of 2.59 stand at a 52-week peak, implying that options players are establishing bearish bets at an annual-high clip.

As such, the equity's Schaeffer's put/call open interest ratio (SOIR) stands at 1.19, in the 82nd percentile of its annual range. Or, in simpler terms, short-term options traders are more put-heavy than usual right now.

This article by Andrea Kramer was originally published on Schaeffer's Investment Research.

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