Amid a wild week for Tesla, trader bets stock will drop 10% in two weeks

It's been a wild week for Tesla as CEO Elon Musk finds himself at the center of a confluence of headlines.

First, the Securities and Exchange Commission asked a judge to hold Musk in contempt for violating a settlement deal. Then, Musk fired back — in a tweet of course — calling the agency "broken." Separately, on Wednesday Musk tweeted that there will be a big announcement from the company on Thursday afternoon. All this comes as Tesla faces a debt payment of close to $1 billion in convertible bonds due Friday.

Shares of the electric automaker are up more than 6 percent since Monday, but as the storm continues to brew around Tesla, one trader is betting the stock won't be able to weather it.

"It's probably not surprising, given all of the news surrounding the company, that we did see double the daily options volume today," said "Options Action" trader Mike Khouw on CNBC's "Fast Money" Wednesday.

"One of the trades that I would point out was a purchase of the 290-puts in March. We saw somebody paying about $5 for those. That would obviously be a bet that [the stock] is going to fall below that strike by at least the $5 that they paid," Khouw added.

Tesla was around $314 per share at the time the trader bought those contracts, meaning their expectation that the stock would be below $285 equates to a plunge of more than 9 percent in just more than two weeks.

As Khouw explained, much of the options trading surrounding Tesla recently has come in the form of big bets on high volatility.

"I would also point out that a lot of this volume is basically betting that [the stock] is going to be sharply higher or lower within the next 30 days. We saw a lot of buyers of the 320-calls expiring on March 29 and also the 280-puts of the same expiration," Khouw said. "This is basically looking for moves of 10 percent or so in either direction."

Tesla was slightly lower Thursday.

Latest Video

Tutorials

Host Bio

  • Melissa Lee

    Melissa Lee is the host of CNBC's “Fast Money” and “Options Action.”

Options Action Traders

From Our Sponsor

Sign Up for Our Newsletter Options Action

Insight directly from the members of our Options Action panel
Get this delivered to your inbox, and more info about about our products and services.
By signing up for newsletters, you are agreeing to our Terms of Use and Privacy Policy.