Options Action: Traders feeling bearish on Tesla

Key Concepts:

• Put Volume vs. Call Volume: The number of put options (betting the price will go down) traded compared to call options (betting the price will go up).
• Options Premium: The price paid for an options contract.
• Weekly Options: Options contracts that expire within a week.
• Leveraged ETF: An Exchange Traded Fund that uses financial derivatives to amplify the returns of an underlying index.
• Strike Price: The price at which an option can be exercised.

Tesla Options Activity Analysis

• Bearish Sentiment in Options Market: The primary observation is that put volume significantly exceeded call volume in Tesla's underlying shares options trading. This indicates a prevailing bearish sentiment among options traders leading up to the results.
• Active Put Options: The most active options contracts were the weekly 225 puts. Over 48,000 of these contracts were traded, with each contract costing around $12. This represents a substantial amount of bearish premium being spent.
• Shifting Trend: Historically, call volume has typically outpaced put volume in Tesla options trading over the past 20 days. However, this trend has been weakening over time, suggesting a change in market sentiment.
• Two Times Leveraged ETF (Specific ETF not named): A two times levered ETF that trades on Tesla is mentioned. This ETF is down over 80% from its highs.
• Optimism in Leveraged ETF: There was more optimism observed in the leveraged ETF compared to the underlying shares options. Buyers of the seven strike calls were paying about $0.53. This was the most active contract in the ETF.
• Reason for ETF Optimism: The optimism in the leveraged ETF is attributed to the instrument itself being levered to the upside. This means that the ETF is designed to amplify gains when Tesla's stock price increases.

Conclusion:

The analysis of Tesla options activity reveals a predominantly bearish sentiment among options traders, as indicated by the higher put volume compared to call volume. The significant activity in the weekly 225 puts further reinforces this bearish outlook. However, there is a contrasting sentiment observed in a two times levered ETF that trades on Tesla, where buyers are showing more optimism by purchasing call options. This difference in sentiment may be due to the ETF's leveraged nature, which amplifies potential gains.