Tesla's Worst Intraday Rout Since 2020 Fuels Options Volume Amid Trump Spat: Options Chatter
$Tesla (TSLA.US)$ saw increasing demand for put options that can shield shareholders from continued slump in the stock price as the rift between its CEO Elon Musk and President Donald Trump worsened.
Shares of Tesla tumbled as much as 17.7% to $273.21 with about half an hour left into Thursday's trading, as the Trump tax bill threaten to cut the incentives given to buyers of electric vehicles. That's the worst intraday slump since September 2020.
JPMorgan analysts estimate that the bill, once enacted into law, could result to a $1.2 billion hit to Tesla's full year profit, Bloomberg reported. Musk earlier branded that bill as "a disgusting abomination."
More than 4 million put options that give their holders the right to sell Tesla shares at a specified strike price, changed hands. That's almost 5X the previous session's total of 845,511 contracts and more than quadruple than the 20-day average of 949,496 contracts, according to data compiled by Bloomberg.
Tesla has benefited from tax incentives given by previous Democrat administrations as part of initiatives to promote clean energy and help ease global warming. Those incentives helped lower the cost of buying Tesla EVs.
Musk spent more than $250 million to help Republican standard bearer Trump get elected during the November 2024 presidential race, according to a CNBC report.
Earlier Thursday, Musk, who once led efforts to cut federal spending through Trump's Department of Government Efficiency (DOGE), branded as "very unfair" the Trump tax bill that cuts EV and solar energy incentives, while keeping the oil and gas subsidies untouched.
The stock ended the day down 14% to $284.68, taking the company's market capital below $1 trillion.
Reacting to Musk's tirades, Trump said he was disappointed with the Tesla CEO, adding that he has helped the CEO "a lot."
"He only had a problem when he found out we're going to have to cut the EV mandate," Trump told reporters in the White House during a press conference Thursday, referring to Musk.
Put options that give their holders the right to sell Tesla shares at $300 by tomorrow attracted the heaviest trading as the stock price fell below that strike price, boosting the odds that the contract will stay in the money before they expire in less than a day. Volume for that contract reached more than 241,500, almost 16X the open interest.
Even institutional investors and large speculators are piling into the Tesla options market. The biggest block trades posted so far was a bearish transaction that an active buyer paying a $92.3 million premium for put options that give their holders the right to sell 1 million Tesla shares at $365 each by tomorrow.
That trade was posted at 3:25:04 p.m. along side another bearish trade with a premium of $85.6 million for put options with a strike price of $357.50 also expiring tomorrow.
Share your thoughts on Tesla, Elon Musk and Trump in the comments section. Who do you think stands to lose more in this worsening rift between Musk and Trump? Share your thoughts in the comments section. And if you want to read more options columns like this one on Meta or this one on Palantir, follow me here.
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Luzi Ann Santos
Moomoo Senior News and Community Manager
Former editor at Bloomberg, ex-commentary editor at Lazard. Posts aren’t investment advice. Views are just mine.
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May 6 20:45
S&P 500's Put/Call Ratio Hits 5-Year Low: Fear Fades and Bottom Near?
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