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Options Pop on Downgraded Tesla Stock

Lillian Currens

Tesla Inc (NASDAQ:TSLA) is getting hit with a bear note from Morgan Stanley just two days after the stock nabbed an all-time high of $547.41. The analyst downgraded the electronic auto manufacturer to "underweight" from "equal-weight" but lifted its price target to $360 from $250 -- still a sizable deficit off last night's close of $518.50 -- questioning the firm's ability to sustain its recent momentum. The stock is now down 1.1% to trade at $512.73, but has pared much of its intraday deficit after finding support at the 10-day moving average.

The analyst note has drawn plenty of options players to the table today, with 330,000 calls and 262,000 calls across the tape in the last hour of trading -- nearly 1.5 times what's typically seen at this point. The January 2020 500-strike put is seeing the most action, followed by the January 2020 510-strike call, with positions being opened at both. 

This bullish lean in the options pits is nothing new. TSLA sports a 10-day put/call volume ratio of 1.66 at the the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which sits in the 97th percentile of its annual range. This suggests a healthier-than-usual appetite for long calls of late.  

On the other hand, short sellers are likely cheering today's dip. Short interest rose 8.3% in the last two reporting periods and the 26.26 million shares sold short represent a healthy 19.6% of the stock's available float.