Oct 24, 2022
Tesla options hint at trouble ahead with bets near US$200 a share
There is a massive demand for EV's in China, and Tesla has to compete: Analyst
Tesla Inc. was the one of the biggest laggards in the S&P 500 Index on Monday, and options traders are betting the stock could drop further before the weekend.
A put contract with a Friday expiration and a strike price of US$200 was the most-traded contract for Tesla on Monday and among the 15-most popular on U.S. exchanges overall during the day. The bearish option in the electric carmaker implies the stock has at least another 5 per cent to fall this week.
Tesla closed near $211 on Monday, down 1.5 per cent from Friday’s close after lowering prices across its lineup in China and options investors are betting shares could fall below $200 by Friday, making the $200 put contract in the money -- or available for immediate profit -- before expiration.
The price of the contract jumped as much as 249 per cent on Monday before settling only 9.9 per cent higher as Tesla’s drop abated. Some 145,000 of the contracts changed hands.
Tesla shares have been on a dizzying roller-coaster ride this year, as jumpy investors reacted to a wide array of both positive and negative news -- ranging from supply problems, demand concerns, production disruptions in China, a cash-strapped consumer and the looming global recession, to the promise of a big boost to the EV industry from the Biden administration's climate act.
Overall though, the bad news has started to overshadow the good, reflected in the stock’s 40 per cent decline this year, compared to the S&P 500 Index’s 20 per cent drop over the same period. A three-for-one stock split, effective since late August, failed to deliver the expected boost despite Tesla’s popularity with mom-and-pop investors, while Elon Musk’s pending deal to buy social-media platform Twitter Inc. continues to be a drag on the EV maker’s share price.