Tesla Sees Declining Put Option Open Interest as Shares Jump

$Tesla Motors(TSLA)$   investors and speculators pared their holdings of put options before shares posted their biggest one-day jump in almost five months on Monday amid optimism for a recovery in the electric vehicle maker’s sales in China.

The latest data had open interest of 3.82 million contracts. Put options that give the holders the right to sell Tesla shares at a specific strike price have declined from its 10-day average of 4.37 million contracts, according to exchange data compiled by Bloomberg. 

The EV giant plans to release its smart-driving assistance feature in China after completing the China regulatory approval process, Reuters reported Monday, citing a post from the company’s customer support on Chinese social media platform Weibo.

That's adding to the positive sentiment that has fueled gains across the wider stock market after President Donald Trump was reported to be looking at narrowing the scope of the tariffs he plans to announce on April 2. The $S&P 500(.SPX)$   rose 1.8% as the $NASDAQ(.IXIC)$   advanced 2.3%.

The open interest for put options declined before the stock climbed almost 12% to close at $278.39 Monday, pushing a number of contracts out of the money. That marked Tesla shares' steepest advance since early November when it jumped almost 15%. 

"Tesla's ability to get its FSD software approved for use reduces the risk that consumers in China will choose another vehicle due to the autonomous driving software, " Morningstar analyst Seth Goldstein wrote in a note to clients Monday, referring to the company’s full self-driving software by its acronym. “This should help Tesla improve deliveries in China, which fell during the first two months of the year.”

Bloomberg Intelligence expects a recovery for Tesla Model Y sales starting in the second quarter after an estimated decline to as low as 195,000 vehicles in the first quarter. The scaled -up deliveries could rise 6% to 1.89 million vehicles in 2025, from a year ago, Bloomberg Intelligence analysts Steve Man and Peter Lau wrote in a note Monday.

“Tesla's Model Y is set to reclaim its edge, as we believe the electric vehicle's refresh and Full-Self Driving in China are sparking greater demand,” the Bloomberg Intelligence analysts said. “The new Model Y, nicknamed Juniper, could temporarily stabilize selling prices as competition intensifies.”

Unusual activities surrounding Tesla options are mostly bearish, though the biggest block trade was bullish. An active buyer paid a $23.2 million premium for call options that give the holder the right to buy Tesla 938,000 shares at $250 each in four days. 

That multi-leg transaction, posted at 10:21:17 a.m. in New York Monday, came with two other bearish trades and one neutral, all costing millions of dollars. 

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