Understanding Tesla's Unusual Options Activity - Benzinga

cicingwos.blogspot.com

Tesla (NASDAQ: TSLA) shares experienced unusual options activity on Monday. The stock price moved up to $429.87 following the option alert.

• Sentiment: BULLISH
• Option Type: SWEEP
• Trade Type: PUT
• Expiration Date: 2020-10-09
• Strike Price: $320.00
• Volume: 6948
• Open Interest: 1155

Three Ways Options Activity Is ‘Unusual’

Extraordinarily large volume (compared to historical averages) is one indication of unusual options market activity. Volume refers to the total number of contracts traded over a given time period when discussing options market activity. Open interest is the number of unsettled contracts that have been traded but not yet closed by either counterparty. In other words, open interest represents the quantity of contracts that individual parties have written but not yet found a counterparty for (i.e. a buyer finding a seller, or a seller finding a buyer).

Another sign of unusual activity is the trading of a contract with an expiration date in the distant future. Usually, additional time until a contract expires allows more opportunity for it to reach its strike price and grow its time value. Time value is important to consider because it represents the difference between the strike price and the value of the underlying asset.

Contracts with a strike price far from the underlying price are also considered unusual because they are defined as being “out of the money”. This occurs when the underlying price is under the strike price on a call option, or above the strike price on a put option. These trades are made because the underlying asset value is expected to change dramatically in the future, and the buyer or seller can take advantage of a greater profit margin.

Bullish And Bearish Sentiments

Options are “bullish” when a call is purchased at/near ask price or a put is sold at/near bid price. Options are “bearish” when a call is sold at/near bid price or a put is bought at/near ask price.

Although the activity is suggestive of these strategies, these observations are made without knowing the investor’s true intentions when purchasing these options contracts. An observer cannot be sure if the bettor is playing the contract outright or if they’re hedging a large underlying position in a common stock. For the latter case, the exposure a large investor has on their short position in common stock may be more meaningful than bullish options activity.

Trading Options With These Strategies

Unusual options activity is an advantageous strategy that may greatly reward an investor if they are highly skilled, but for the less experienced trader, it should remain as another tool to make an educated investment decision while taking other observations into account.

For more information to understand options alerts, visit https://pro.benzinga.help/en/articles/1769505-how-do-i-understand-options-alerts

© 2020 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

Let's block ads! (Why?)

"activity" - Google News
October 05, 2020 at 09:01PM
https://ift.tt/33u8S99

Understanding Tesla's Unusual Options Activity - Benzinga
"activity" - Google News
https://ift.tt/3ddCXMh
https://ift.tt/2WkO13c

Bagikan Berita Ini