A put option, which expires on Friday, was Tesla's best-selling contract on Monday and one of the top 15 most traded on US exchanges overall for the day. At the moment, the strike price for the car company's shares is approaching $200. The bearish trend for the electric car maker implies that the company's shares will drop at least another 3% this week.
Tesla was hovering around $207 on Monday, down 3% from the company's share price during Friday's close after price cuts across the entire lineup in China. Options investors are betting that the stock could drop below $200 by the end of this business week, making the option contract more profitable and available for immediate profit.
As nervous investors have reacted to a wide range of both positive and negative news this year, Tesla's stock prices have been subject to significant price action. Investor reactions have also shifted frequently for many reasons, ranging from supply issues, demand issues, production disruptions in China, consumer lack of money, and a looming global recession, to the promise of big stimulus for the electric car industry from the Biden administration's climate act.
However, overall, the bad news has begun to overshadow the good news, reflected in a 41% drop in stocks this year compared to the S&P 500's 21% drop over the same period. A 3-for-1 stock split that went into effect at the end of August didn't deliver the expected gains despite Tesla's popularity among mom-and-pop investors, and Elon Musk's deal to buy social media platform Twitter Inc is pending and is still weighing on the electric car maker's share price.