Tesla Options Surge Amid Bullish Bets

By Saqib Iqbal Ahmed

NEW YORK (Reuters) – Investors are flocking to bullish options bets on Tesla (NASDAQ:TSLA), with the stock reaching its highest level in over two years. This surge is fueled by expectations that CEO Elon Musk’s strong ties to President-elect Donald Trump may benefit the electric car manufacturer.

Tesla shares rose roughly 8% to $346.12 on Monday, marking a more than 35% increase since the Nov. 5 election, reaching levels not seen since April 2022.

On Monday, Tesla's options were the most heavily traded among individual stocks, with approximately 2.5 million contracts exchanged by noon, more than double the typical volume, as reported by Trade Alert.

Steve Sosnick, chief strategist at Interactive Brokers (NASDAQ:IBKR), noted, "It's euphoric. Tesla is by far the most active option at our shop.” He pointed out a significant number of call contracts at the $400 level, about 13% above the current stock price. Trade Alert indicated that much of the activity was centered on near-term contracts, with options expiring by Friday accounting for around 56% of total trading volume.

Musk has shown support for Trump for months and has contributed at least $119 million to a pro-Trump spending group, according to federal records. His business ventures—including Tesla, SpaceX, and Neuralink—are highly dependent on regulation, subsidies, and policy, and analysts suggest they could benefit from a friendly administration.

On Monday, Wedbush Securities increased its target price for Tesla shares from $300 to $400, viewing the Trump White House win as a "gamechanger for the autonomous and AI (artificial intelligence) story for Tesla and Musk in the coming years."

The most actively traded options were those struck at $350 and $400, set to expire by Friday, with a combined volume of around 180,000 contracts.

The bullish activity in options could also be driving up the stock price, as options dealers who sold upside contracts buy more shares to cover their exposure. Sosnick remarked, "If enough people speculate on certain strikes, the stock can have a tendency to move toward those strikes."

The notable increase in the stock price and significant options interest indicates that Tesla call options are becoming more expensive, potentially inviting sellers, according to Brent Kochuba, founder of financial insights company SpotGamma.

Kochuba cautioned that if the stock price does not maintain its recent gains, it could result in a decline in the price of those calls, which could, in turn, pressure the stock downward.