Tesla Option Traders Are Dumping Massive Amounts Of Calls

Tesla Inc TSLA gained another 2.8% on Wednesday and is now up 1,560% in the past 18 months.

While Tesla bulls are betting the stock’s insane run will continue following a Democratic Senate sweep in Georgia, some Tesla option traders are dumping massive amounts of call options on Wednesday.

Related Link: What A Democratic Victory In Georgia's Runoff Election Means For The Stock Market

The Tesla Trades: On Wednesday morning, Benzinga Pro subscribers received dozens of alerts related to unusually large Tesla option trades. Here are the four largest:

• At 9:30 a.m. ET, a trader sold 310 Tesla call options with a $260 strike price expiring on Sep. 17. The contracts were sold at the bid price of $500 and represented a $15.5 million bearish bet.
• At 11:31 a.m. ET, a trader sold 921 Tesla call options with a $1,400 strike price expiring in Jan. 2022. The contracts were sold near the bid price at $100 and represented a $9.21 million bearish bet.
• At 11:33 a.m. ET, a trader sold 798 Tesla call options with an $850 strike price expiring on Jun. 18. The contracts were sold at the bid price of $117.46 and represented a $9.37 million bearish bet.
• Less than a minute later, a trader sold 798 Tesla call options with a $700 strike price expiring on Mar. 19. The contracts were sold at the bid price of $130.38 and represented a $10.4 million bearish bet.

Why It's Important: Even traders who stick exclusively to stocks often monitor option market activity closely for unusually large trades. Given the relative complexity of the options market, large options traders are typically considered to be more sophisticated than the average stock trader. Many of these large options traders are wealthy individuals or institutions who may have unique information or theses related to the underlying stock.

Unfortunately, stock traders often use the options market to hedge against their larger stock positions, and there’s no surefire way to determine if an options trade is a standalone position or a hedge. In this case, given the relatively large size of the largest Tesla option trades, there’s certainly a possibility they could be an institutional hedge on a large position in Tesla stock.

Tesla Investors Cashing In: Wednesday’s big option trades come after Tesla reported a record 180,570 vehicle deliveries in the fourth quarter, up 29.6% compared to the third quarter. That number exceeded analyst estimates of 174,000 vehicles.

For the full year of 2020, Tesla delivered 499,550 vehicles. Tesla bulls highlight the fact that growth of any kind is impressive given the difficult 2020 environment, while bears point out that Tesla’s 800% increase in market cap isn’t exactly in-line with its 35.9% increase in deliveries.

Tesla had previously said it would “comfortably exceed” 500,000 vehicle deliveries in 2020. CEO Elon Musk had also said Tesla would have a million robotaxis in operation in 2020.

Tesla investors are hoping Democrats in control of the White House and Congress will provide a significant tailwind for clean energy stocks. On Wednesday, Wedbush analyst Daniel Ives said a sweep in Georgia would be particularly bullish for electric vehicle stocks like Tesla, General Motors Company GM and Fisker Inc FSR.

Benzinga’s Take: The four largest option trades on Wednesday morning were all call sales, and they represented an aggregate of more than $44 million in bearish Tesla option trading volume. Tesla bulls can’t be upset about option traders cashing out on what could potentially be massive trading gains on these calls after Tesla’s historic run.