Tesla Options Action: Bearish Sentiment and Potential Downside Strategies

Bearish Sentiment in Tesla Options

• 📉 The options action around Tesla has become decidedly bearish, a reversal from its typical trend of calls outpacing puts.
• ⚠️ The ratio of 5% out-of-the-money puts to calls is at its most bearish point in five years, suggesting a potential shift in market sentiment.

Interpreting Bearish Signals

• 💡 Despite the bearish indicators, the extreme bearishness might suggest that Tesla is closer to a bottom.
• 📊 Historically, significant pullbacks in Tesla (50% or more) have seen an average further decline of about 57%.

Strategies for Further Downside

• 💰 For those anticipating further downside, the speaker suggests avoiding buying premium and instead using a 1 by 2 put spread.
• 🎯 A specific example trade involves April 225 puts combined with selling two 195 puts, which could be executed for near even money.
• ⚠️ This strategy could profit from a further pullback, but it would result in a long position at 165 if executed.
• 📈 The transcript notes that a valuation of 30 times earnings, which could be around $130 per share, is significantly lower than current levels.