Unusual Option Activity in Tesla: Bears Hit it Big

Recently, Market Rebellion identified a series of massive bearish bets being made against EV darling, Tesla. It started just two weeks ago, on September 29th. Market Rebellion identified 4,171 bearish put spread spreads bought at the $260-$240 range for $5.98 per spread.

Source: Market Rebellion Unusual Options Activity

Total trade price: $2.5 million dollars.

At the time, with Tesla trading at $275.56, shares would have had to fall by roughly 13% in just one month for the spread to reach full profitability (which would raise the value of this $2.49M bet to more than $8.3M).

Spoiler alert: It took a week, not a month, for Tesla to fall below $240.

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Source: Evening Standard

Despite those spreads having more than tripled in value since their initial purchase, bears weren’t finished with Tesla stock. On October 3rd, Market Rebellion identified yet another big bearish bet against the EV giant.

Inarguably, this bet was even bolder. This trader picked up 18,000 long put options for an average contract price of $8.28.

Source: Market Rebellion Unusual Options Activity

Total trade price: $15 million dollars.

In order for these put options to break even, Tesla shares would have had to fall an additional 2.46%. Upping the ante even further: These put options were set to expire in just five days.

Then, just one day later, the news broke:

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Source: Variety

Within minutes of the news breaking, Tesla bears were back once again with two more truly outlandish out-of-the-money bets against Tesla.

With Tesla trading at $247.89, Market Rebellion identified a buyer of 5,000 $210 strike put options expiring 10 days from the initial trade — and 10,000 $120 strike put options expiring in January.

Source: Market Rebellion Unusual Options Activity

Total trade price: $2.96 million dollars.

While this trade wasn’t as large as the bearish $15M trade made the day before, this trade stuck out for a different reason: This trade was calling for Tesla to drop another 16% by the end of the following week, and more than 50% by January. This, with the stock having already fallen by more than 10% that week.

In response, one twitter user said:

Source: Twitter

What happened next?

Source: CNBC
Source: TradingView

Tesla fell again. By October 12th, those $210 put options expiring on 10/14 (you might remember it as the “absolutely moronic bet” traded as high as $5.55 — a 288% price appreciation from the initial trade price. And those $120 strike January put options? Tesla didn’t need to fall 50% in order for those to turn a profit — just eight days after their purchase, those $120 strike put options traded for as high as $3.80 — a 69.6% price appreciation.

If someone is willing to stake more money on a two-week-to-expiration bet than Ariana Grande spends to buy a mansion, it’s probably worth paying attention. You might have your opinion on what is and isn’t “a moronic bet”, but at the end of the day, most people who have amassed multi-million dollar fortunes in the market aren’t in the business of throwing it away. Chances are, there’s a good reason why they’re making that bet. 

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