Tesla's Put Options Demand Rise as EV Giant Struggles to Boost Sales: Options Chatter

$Tesla (TSLA.US)$ is seeing increasing demand for put options that can shield their holders against a potential slump as the electric vehicle giant continues to struggle to revive sales.

About 1.14 million put options changed hands with less than an hour left into the trading day, up from 883,000 contracts a day earlier and the 20-day average of 967,167 contracts.

(To see Tesla's options chain, click here. For the unusual options activities, click here.)

Tesla unveiled a lower-priced version of its Model 3 car in Europe on Friday, a few months after releasing it in the U.S., as the electric vehicle giant attempted to reinvigorate demand, according to a Reuters report.

Earlier this week, Reuters also reported that registrations of new Tesla cars fell more than 50% in France and Sweden in November amid increasing competition from Chinese manufacturers, Reuters reported earlier this week. Registrations were down more than 40% in Denmark, the Netherlands and Portugal.

Tesla’s implied volatility rank was at 4, near the low-end of a range that goes as high as 100. That means options are relatively less expensive compared to its level over the past year. Implied volatility, which measures the market’s expectations of a stock’s potential price changes with variables including options premiums, was at 51.76%, down from 74.2% on June 23, when shares climbed 8.23%.

The lower cost of buying downside protection is bolstering the appeal of put options. An active buyer paid a premium of about $11.7 million for put options that give their holder the right to sell Tesla shares at $440 in 378 days. That strike is more than $15 below the current stock price, signaling the buyer’s fear that Tesla shares could slide.

Despite persistent weakness in Tesla shares, the stock has risen almost 60% over the past three months amid optimism that CEO Elon Musk’s plans to turn the company into the market leader in robotaxis and humanoid robots could boost revenue.

That promise was the main motivator for shareholders who approved Musk’s $1 trillion pay package, which could pay out should the company reach targets including an almost six-fold jump in its market capital to $8.5 trillion.

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