A Barchart report today shows some Tesla Inc. (TSLA) institutional investors have bought long-dated call options (over 1-year expiry). The out-of-the-money call purchases show these buyers are bullish on TSLA.
TSLA is up over 1.5% today at $354.28, well up from a recent low of $298.32 at the end of July (7/29). However, it's still below a recent peak of $425.30 on July 1.
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It could rise again, as analysts have much higher price targets. For example, Yahoo! Finance reports the average price target of 46 analysts is $390.09, or +10% higher.
Similarly, Barchart's mean survey price target is $397.94, or 12% higher. Moreover, 28 analysts surveyed by AnaChart, including more recent analyst writeups, have an average price target of $414.44, +17% upside.
That could be why a large institutional investor(s) bought an unusually large amount of out-of-the-money calls that expire in over one year.
Unusual TSLA Call Options Buying
This is seen in today's Barchart Unusual Stock Options Activity Report. It shows that over 2,770 call options contracts have been bought at a $420 strike price that expire on Sept. 17, 2027, or 388 days from now.
TSLA calls expiring Sept. 17, 2027 - Barchart Unusual Stock Options Activity Report - Aug. 25, 2026 That exceeds 22 times the prior number of call options that were outstanding at the strike price and expiry period. The premium paid was $103.40, so the investor expects TSLA to rise to over $523.40, or +47.7% higher than today's price.
Buyers and Sellers of Calls Bullish on TSLA
That shows they are extremely bullish on the potential TSLA upside over the next year.
Of course, the investor may not actually expect to exercise their calls. They may be speculating that as TSLA rises, the call option premium will rise commensurately. However, the extrinsic value will deteriorate over time.
So, for example, if TSLA hits $420 in the next three months, the call options may be worth $135 or $145. That means the investor will have made a potential 35% 3-month return. That would be better than the 19% gain from TSLA rising to $420 over that period.
Moreover, short sellers of these calls are also essentially bullish on TSLA. They are happy to sell their shares at $420 for a $103.40 premium.
In other words, even if TSLA stays flat or doesn't rise to $420 over the next year, they will have earned a 29% yield (i.e., $103.40 / $354.28).
And if the calls are exercised at $420, the call option sellers make an additional capital gain of 19%, for a total return of almost 50%.
The bottom line is that both buyers and sellers of these out-of-the-money call options are bullish on TSLA.
Investors should be careful in copying a buy of these call options. It could result in a 100% loss. For example, if TSLA does not rise to $420 on or before Sept. 17, 2027, the call option premium will waste away to zero.
On the date of publication, Mark R. Hake, CFA did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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