Tesla, Google Parent Alphabet See Diverging Sentiment in Option Trades: Options Chatter

Magnificent Seven bulls’ conviction is being put to a test as the AI trade loses steam, highlighting the important role options play in managing risks.

An active buyer paid a $13.24 million premium for put options that give their holder the right to sell 697,000 Tesla shares at $430 each in the next 35 days. That strike price is just $5 below the current stock price. The size of that transaction is more than 14X the open interest, signaling it’s a new position.

That trade was posted even as Tesla shares advanced 4.5%, putting them on course for their biggest advance since mid-November. The gains came after news reports that CEO Elon Musk was reportedly considering a merger between the electric vehicle giant and SpaceX or xAI.  

The second- and third-biggest single-leg block trades involving Tesla were bullish, reflecting the prevailing positive sentiment that’s fueling Friday’s share price gains.

An institutional investor or large speculator paid a $1 million premium for call options that give their holder the right to buy 124,000 Alphabet shares at $342.50 each in the next 7 days. That strike price is higher than current level of $338.21, signaling optimism that the record-breaking rally has room to run.

Alphabet’s 68% jump over the past year reflects its strong fundamentals that convinced JPMorgan analysts to name the Google parent among its top picks in the tech sector. They cited the company’s leadership in artificial intelligence, margin stability and growth in data and distribution, as they favored the stock.

That multi-leg transaction came with the sale of the same number of call options with a higher strike price of $352.50 each, limiting the gains, in case the stock rips higher.