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Tesla - One Day Options. Not Your Typical Read

This blog is going to be a tough read because it tries to track Tesla's early morning option trading in the last day of trading in the October 18th 220 series of Tesla Calls. Critics of "one day" options are having a hayday in pointing out these "one-day-to expiring" options are a mockery to concept of sound financial investing. Here is Tesla's premarket trading price in the 220 series of Calls at 9:29 a.m. on Friday Oct. 18th. They are flat. Remember last Friday was an exceptional day for the Tesla stock with it being hit with a $21.14 drop on the day. Do today's traders remember this? Probably not. Why should they? It's a given this stock can be volatile. Option traders playing the downside last Friday on Telsa made out like bandits. Now it's 9:31 a.m.reading. Up only eleven cents. Option traders are in a period of time where they have to deal with early morning trading jitters. Is there a glimmer of hope that this stock might bounce up one
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A Test To See How Smart Short Term Tesla Option Traders Are.

This is a unique opportunity to observe something which could shed some light on how smart Telsa option players really are. Telsa crashed on an earnings report release and short term option players were given a unique opportunity to speculate on a one day Friday rebound. Alternatively, a second option they were offered was to speculate on a further one day (Friday) decline caused by "late-to-the-party" investors wanting to get out of this news before things got even worse. YouTube videos scream a crash is coming in EV sales. It's one of those occassions where the earnings were actually pretty solid but where analyst set their expectations slightly higher. First a one day look at how Telsa traded on Jan 25th, 2024. It was down a chunk. When I say down a chunk it was down 12% in one day.
Here are two short articles to better explain this action.
So what is the "Let's See How Smart the Telsa Short Term Option Traders" is caption all about? Well it all has to do with the open interest numbers of the 182.50 Telsa Calls and the open interest numbers in the 182.50 Telsa Puts that expire the next day which is Friday Jan 26th. What I am about to show you are the open interest numbers in these two series of options on Thursday January 25th at the close. First the Calls.
63,694 contracts traded on the day and only 86 contracts remained open at the end of the trading session! What the heck is that all about? Why are trader's afraid to hold onto these Calls overnight going into a Friday trading session? Is it a behaviour pattern learned from previous Telsa trading experiences? Not really. The reality is that these were Calls sold by investors who most likely already owned the stock. Most likely they sold these Calls on Thursday morning as protection against the possible downside on the day. Getting out near the end of the day was just to take a profit and to protect themselves from a Friday morning rally. Now here are the Puts to look at.
Now here is where it gets interesting. 4,742 open interest contracts on the Puts compared to once again 86 open interest Call options. Obviously the option makers want to burn as many Put holders as possible so it is in their best interest to see the stock move up slightly on the opening. This would shake out many of the Put holders. Knowing this and with so much money sloching around why isn't there more interest in playing the upside? That's something I don't completely understand. So here is what ended up happened.
At 10:03 a.m.on Friday morning the stock was up. What are the odds of almost everyone miscalculating this outcome? Here are Friday morning new pricings on these two series of options at 10:03 a.m.. First the Puts.
Put buyers continued to pile in during the first five or ten minutes of trading at prices of half of what they were at on the previous close, however half of these traders were smart enough to bail out quickly get all or most of their money back. The Put options ended up expiring worthless at the end of the trading session. The Calls faired much better on the opening.
They opened at $4.15 and briefly went to $5.00! But then again, there was so few of them in existance. People getting in between 9:30 a.m. and 10 a.m. on the Calls lost money and people getting in at around 10:00 a.m. could have made a touch of money if they sold out within the next twenty mintutes. The option makers were able to burn the majority of both Call and Put holders. All of the short term options players turned out to be not so smart afterall. That's what often happens on a Friday after a Thursday crash.

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