TSLA – Tesla Motors, Inc. – Bearish options are changing hands on Model S producer, Tesla, on Wednesday as shares in the electric car maker reverse some of the strong gains realized earlier in the week. Shares are currently down 7.4% on the session at $41.06 as of 11:45 a.m. ET after yesterday rallying to fresh all-time highs. The stock continues to trade up 8% since this time last week despite the pullback today. Tesla CEO and billionaire entrepreneur, Elon Musk, yesterday announced a new financing plan for the Model S and earlier this week said demand for the vehicle is stronger than anticipated. Shares in TSLA moved up as much as 23% on Monday in anticipation of Musk’s Tuesday evening announcement. Options on the stock are more active than usual, with overall volume in excess of 26,000 contracts at midday versus average daily volume of 19,300 contracts. Sizable prints in June expiry put options suggests one strategist may be bracing for further declines in the price of Tesla’s shares during the next couple of months. It looks like the trader purchased a 4,500-lot Jun. $30/$35 put spread at a net premium of $1.40 each. The strategy makes money if shares in TSLA drop 18% to trade below the breakeven point at $33.60, with maximum potential profits of $3.60 per contract available given a more than 25% pullback in the price of the underlying to $30.00 by June expiration. We note that open interest in the $30 strike puts is substantial, indicating the strategist could be rolling an existing put position up to the $35 striking price. If this is the case, profits to the downside are not capped beneath the $30.00 level.
Affiliation: Interactive Brokers
Caitlin Duffy joined Interactive Brokers in 2009. In her role as Equity Options Analyst, Caitlin provides daily market commentary; highlighting various options trades, trading patterns and strategies of interest. Through Interactive Broker's webinar program, Ms. Duffy presents a number of educational, options-related events describing the theoretical pricing of options, the option Greeks as well as options strategies.
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