By Saqib Iqbal Ahmed
NEW YORK (Reuters) – Investors are piling into bullish options bets on Tesla shares, with shares hitting their highest level in more than two years on bets that CEO Elon Musk’s close ties with President-elect Donald Trump could be a good thing come to the manufacturer of electric cars.
Shares of Tesla rose about 8% to $346.12 on Monday and have risen more than 35% since the Nov. 5 election. They are now at their highest level since April 2022.
Tesla’s contracts were the most traded options on individual stocks on Monday, with some 2.5 million contracts changing hands by midday – more than twice the usual pace, according to Trade Alert.
“It’s euphoric,” said Steve Sosnick, chief investment strategist at Interactive Brokers. “Tesla is by far the most active option in our store.”
He noted a heavy concentration of call contracts at the $400 level, about 13% above the stock’s current price. Trade Alert data shows that much of the trading is concentrated in short-term contracts, with options expiring on Friday making up about 56% of total trading volume.
Musk has supported Trump for months and has contributed at least $119 million to a pro-Trump spending group, federal records show. The billionaire’s business ventures, which in addition to Tesla EVs range from SpaceX rockets to Neuralink brain chips, rely heavily on regulations, subsidies and policies, and analysts said they could benefit from a friendly government.
On Monday, Wedbush Securities raised its price target on Tesla shares from $300 to $400, saying they see the Trump White House victory as a “game changer for the autonomous and AI (artificial intelligence) story for Tesla and Musk in the coming years.”
Tesla options were at $350 and $400 and are expected to expire on Friday. These were the two most actively traded contracts with a combined volume of approximately 180,000 contracts.
The bullish options action also likely helped push the stock higher, as options traders who sold upside contracts responded to the surging stock by buying more shares to hedge their own risk.
“If enough people speculate on certain strikes, the stock may tend to move toward those strikes,” Sosnick said.
The big jump in the stock price and huge interest in options also means Tesla call options will become more expensive and could attract sellers, said Brent Kochuba, founder of SpotGamma, a financial insights company.
Should the stock fail to keep up with its recent moves, it could lead to a decline in the price of those calls, he said.
“That could put pressure on stocks,” Kochuba said.
(Reporting by Saqib Iqbal Ahmed; Editing by Ira Iosebashvili and Leslie Adler)
