Tesla Inc. TSLA is set to release first-quarter delivery numbers next week, and investors will be watching to see if the global chip shortage has impacted Tesla’s numbers.
NIO Limited’s NIO March 2021 delivery numbers were released Thursday, showing a 373% year-over-year increase.
If Tesla is able to show similar growth, the stock could be in for another big move.
On Thursday, Tesla option traders took positions that showed while they’re expecting a bullish move in the stock, there is downside risk.
The trades came in with both calls and puts, showing traders are hedging their positions.
The Strategy: A trader hedges a position by purchasing both call and put options to eliminate the risk of adverse price movements. Once the stock begins to move in one direction, the trader can then sell the options that are losing value.
While the trader loses some of the original investment in the position that was hedged, it is made up for by the successful investment position.
The Tesla Calls: At 10:41 a.m. Thursday, a trader executed a call block of 100 Tesla options with a $590 strike price expiring on April 1. The trade represented a $914,000 bullish bet for which the trader paid $91.40 per option contract.
At 10:42 a.m., a trader executed a call sweep of 124 Tesla options with a $680 strike price expiring on April 1. The trade represented a $102,900 bullish bet for which the trader paid $118.90 per option contract.
At 10:43 a.m., a trader executed a call block of 100 Tesla options with a $570 strike price expiring on April 16. The trade represented a $1.19-million bullish bet for which the trader paid $5.50 per option contract.
Traders are betting over $2.2 million the share price of Tesla is going higher.
The Tesla Puts: At 10:34 a.m. Thursday, a trader executed a put sweep of 112 Tesla options with a $710 strike price expiring on April 1. The trade represented a $325,200 bearish bet for which the trader paid $29.03 per option contract.
At 10:43 a.m., a trader executed a put sweep of 355 Tesla options with a $680 strike price expiring on April 1. The trade represented a $170,300 bearish bet for which the trader paid $4.80 per option contract.
At 10:51 a.m., a trader executed a put sweep of 202 Tesla options with a $640 strike price expiring on April 9. The trade represented a $103,800 bearish bet for which the trader paid $12.97 per option contract.
At 10:52 a.m., a trader executed a put sweep of 80 Tesla options with a $690 strike price expiring on April 1. The trade represented a $106,200 bullish bet for which the trader paid $13.27 per option contract.
Traders are betting over $705,500 the share price of Tesla is going lower.
Why It’s Important: When a sweep order occurs, it indicates the trader wanted to get into a position quickly and is anticipating an imminent large move in stock price.
A sweeper pays market price for the call option instead of placing a bid, which sweeps the order book of multiple exchanges to fill the order immediately.
These types of call option orders are usually made by institutions, and retail investors can find watching for sweepers useful because it indicates “smart money” has entered into a position.
When a block trade occurs, it indicates a hedge fund or institution has taken an options position.
A block trade always involves large sizing and is typically handled by a blockhouse outside of the open market. Because block trades don’t occur on the open market, the large size of the trades doesn’t create volatility in the stock being traded.
Like sweepers, blocktrades indicate “smart money” has entered a position.
TSLA Price Action: Shares of Tesla were trading near-flat at $668.25 at last check Thursday.
Photo courtesy of Tesla.
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