I track unusual options activity during every trading session and at the end of the day. Plus, I highlight the most sizeable options activity that occurred. I determine unusual options activity by looking for a sudden spike in the open interest levels for the strike purchased.
Also, I use a quantitative ratio called “volume/open interest.” This ratio gives investors some insight into what large institutional investors are doing with sizeable volume orders. This figure tells you when volume exceeds open interest, signaling new positioning.
TSLA’s unusual options activity
Tesla recently reported impressive delivery numbers, beating Q4 delivery guidance. More specifically, Tesla produced around 105,000 cars in the fourth quarter. It delivered approximately 112,000 cars, beating the consensus figure of 106,100.
During Q4, Tesla delivered 92,550 Model 3 vehicles and 19,450 Model S and X cars. This number represents 24% year-over-year growth. Tesla ended with a total of 367,500 cars for fiscal 2019. This targeted the low end of its fiscal 2019 guidance of 300,000–400,000 cars.
Following this announcement, Tesla stock has climbed almost 3%, adding $12.75 to its share price. However, it lost 0.25% during the January 3 after-market trading session.
In terms of technicals, Tesla stock is breaking out of the serious resistance zone of $430.00–$435.00, which was its previous 52-week high. With that being counted, recent unusual options activity confirms a recent breakout. It also suggests that the stock could stay above the $435.00 price level at least during this week. Let’s interpret this more in-depth.
Tesla’s options activity in focus
Before we go to the specific interpretation of options activity, I performed the same type of analysis in Why Tesla Stock Still Has Big Upside Potential. Since that post was published, the stock has increased from $425.25 to $443.01, representing an upside of about 4%.
First of all, let’s consider the put option with a strike price of $435 and an expiration date of January 10. The contracts were traded near the bid price of $6.30, which means that contracts were sold. By selling the puts with a $435 strike, the trader expects that the stock will stay above the $435 price level by its expiration on January 10.
Moreover, the total number of contracts traded for the day equals 3,619, while the total number of open options contracts equals 117. This brings the volume/open interest ratio to 30.93x, emphasizing unusual options activity. For this reason, TSLA stock would likely close above the $435.00 mark by the end of the week.
In addition, there was a purchase of January calls for TSLA on Tuesday. A trader purchased approximately 1,500 January 10 $440.00 call options for $5.40 per contract.
Tesla’s stock movements
After the markets closed on Tuesday, the stock was priced at $418.33. This level means that if the stock reaches the strike price purchased, the security has an upside potential of 6.4%. If the option buyer plans to hold the contracts until the expiration, the price they’d need to break even would be $445.40, excluding costs and commissions.
Since the trade was completed, the stock price increased from $418.33 to $443.01 after the markets closed on January 3. Keeping that increase in mind, the potential common stock upside has fallen from 6.4% to 0.5%—if the stock can reach the $440.00 strike price by the expiration.
Unusual options activity in GE stock
Another company that my screener captured is General Electric. I’ve covered GE a few times on Market Realist. Since my most recent article, General Electric Options Traders Betting on a Bullish Jump, the stock surged from $11.34 to $11.97, an increase of about 5.5%.
For now, let’s see the notable changes in the open interest levels for this company. There have been more than 20 option bets placed on GE over the last trading session. However, I want to emphasize only the largest trade.
Regarding the open interest levels for February 21, $12.00 calls almost doubled during Friday’s trading session. According to BarChart.com, the open contracts rose by 1,960 contracts to about 4,790. The contracts traded at $0.62 on Friday.
The open interest represents a total dollar value of about $310,000. For the buyer of the $12.00 calls to obtain a profit, General Electric stock would need to climb to $12.62. That would be a gain of about 5.4% from the last closing price.
Looking for more of my Market Realist technical analysis? Check out Apple: An Options Strategy if You Expect a Recession, NIO and AAPL, Two Stocks with Unusual Options Activity, and AbbVie Stock Lags Biotech Industry—Is It Undervalued?