The following originally appeared on TradeStation's Market Insights
blog
Are traders bracing for a crash in Tesla Motors, Inc. (NASDAQ: TSLA)? Options data suggests they could be.
TSLA’s average put-call ratio over the last 20 sessions has risen to about 1.8 — its highest since the electric car maker went
public in 2010. The gauge measures open interest, or established options positions carrying over from one session to the next.
The put-call ratio is a common measure of sentiment, found among dozens of prebuilt indicators on TradeStation. The elevated reading is potentially bearish because
puts fix the price
where a stock can be sold. Traders use them for hedging or to speculate on a move to the downside. (See our Knowledge Center.)
In another potentially bearish sign, TSLA tried to rally this morning on news that China would ease tariffs on imported
automobiles. But that pop quickly faded, and now the stock is on course for its lowest close since early April. That could be
viewed as just one more sign that a string of bad news is killing confidence, which is especially troublesome for a company that
needs to ask investors for capital to maintain its growth plan.
Tesla Motors showing put/call ratio, 50-day moving average
Just to recap: On Monday, Consumer Reports found a braking problem with TSLA’s Model 3 sedan. Last week, Reuters reported management would halt its assembly
line in late May to address production issues. There’s also been a string of executives leaving the company, along with Musk’s
infamously weird behavior on a May 2 conference call.
And don’t forget about the stock chart. It tried to break above its 50-day moving average earlier this month, but quickly
reversed lower. That’s often viewed as a directional signal. It might be even more bearish for TSLA because most other major
Nasdaq-100 companies are now back above their 50-day moving averages.
In summary, this isn’t a recommendation and traders needs to draw their own conclusion, but the potential negatives seem to keep
piling up for TSLA.
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