Tesla Is Towering Over Megacap Tech in the Options Market

Oct 26, 2021

Observations & Insight

Here is what Cboe’s Henry Schwartz, head of product intelligence, information solutions group, had to say about the action in Tesla yesterday via LinkedIn:

“Truly mind blowing Tesla option flow today as shares blew through the $1000 level. Records included total option volume of 3.55M contracts, and total premium over $16 billion (55% of the entire US market). Implied volatility increased nearly 10 points to 45% in the Nov term with upside skew suggesting bulls are looking for further short-term gains (on top of the 29% two-week climb). 10/29 weeklys made up 54% of today’s flow.” — LinkedIn

Lead Stories

Tesla Is Towering Over Megacap Tech in the Options Market
Justin Zacks – Bloomberg
Some of the world’s largest tech companies, with a combined market value of over $9 trillion, are set to report earnings this week but these behemoths are being overshadowed by Tesla Inc. in the options market.
Tesla, despite reporting earnings on Oct. 20, accounted for eight of the top nine most-traded single stock options on Monday. Tesla $1,000 calls for expiration Friday topped the list with over 210,000 contracts traded as of 2:00 p.m. New York time. The bullish interest comes as the electric-vehicle maker’s market-cap eclipsed the $1 trillion mark on the heels of a 100,000 unit order from car-rental company Hertz Global Holdings Inc.

Tesla’s (TSLA) Share Surge Fired Up by a Jump in Call Options
Lu Wang – Bloomberg
There were plenty of reasons for Tesla Inc. to rally Monday. Everything from Hertz Global Holdings Inc.’s blockbuster order to buying by passive funds and a squeeze on short sellers.
But other forces were at play in goosing the gain: options traders who piled on bullish bets, and market makers who were forced to purchase shares to hedge their positions as the stock surged.

Betting for or Against Trump SPAC Is Expensive as Options Trade Begins
Andrew Bary – Barron’s
Options trading began Monday in Digital World Acquisition, the so-called Trump SPAC, and prices for calls and puts are very high, reflecting the volatile recent trading in the stock.
Shares of Digital World Acquisition (ticker: DWAC), which rocketed higher last week after announcing a merger with former President Donald Trump’s new social media platform, Trump Media & Technology Group, were down 8%, at $86.44 in heavy trading Monday of about 60 million shares.

Are options underpricing impending risk to AUD/USD?
FX options use implied volatility to gauge actual volatility expectations and determine premium but, despite some key impending data before a Reserve Bank of Australia meeting next Tuesday, implied volatility remains surprisingly low.
Volatility traders want actual volatility to outperform implied over the life of the option, so higher implied suggests expectations of higher actual volatility, and vice versa. Overnight options expire the next working day at 10 a.m. New York time so now include Wednesday’s Australian CPI, but while there was plenty of two-way trading around 12.0 in Asia on Tuesday, overnight implied volatility is no higher than before capturing the data.

Swapping GameStop for ETFs, Retail Investors Ride Out Volatile Markets
Caitlin McCabe – WSJ
Record numbers of individual investors flooded the markets during the Covid-19 pandemic. Almost two years in, they’re still hanging around—though their strategy has changed.
The U.S. stock market is emerging from one of its choppiest stretches in the past year, a rapid pullback starting in September that sent the S&P 500 tumbling 5.2%, its steepest fall since October 2020.

Quant Hedge Fund GSA Capital Joins the Rush to Ride Crypto Boom
Justina Lee – Bloomberg
When Chris Taylor’s money-printing Dogecoin trade was wiped out in the $650 billion crypto crash back in May, the stakes were low. The 37-year-old was simply having fun YOLO trading from his personal account.

Latest Impact of Europe’s Energy Crisis is a Plunge in Trading
Lars Paulsson – Bloomberg
The unprecedented volatility in European energy markets is taking its toll on trading activity.

Moody’s warns of ‘systemic risks’ in private credit industry
Robin Wigglesworth, Joe Rennison and Antoine Gara – Financial Times
The burgeoning private credit industry of lending to buyout groups has grown to about $1tn, but opacity, eroding standards and the difficulty in trading these slices of debt pose “systemic risks”, according to rating agency Moody’s.
Investor money has gushed into so-called private markets in recent years, in the hope that venture capital, private equity, real estate and infrastructure will provide an alternative to the dimming outlook for returns in mainstream public stock and bond markets.

U.S. natgas jumps near 12% on cooler forecasts, short covering
Scott DiSavino – Reuters
U.S. natural gas futures soared almost 12% to a near three-week high on Monday on expectations liquefied natural gas (LNG) exports will rise and forecasts calling for cooler weather and higher heating demand over the next two weeks than previously expected.


Option Assignment Processing Modification on Thanksgiving Holiday (November 25, 2021)
Please be advised that due to the November 25th Thanksgiving Holiday, CME Clearing will be modifying Exercise and Assignment processing for the January 2022 contract month of the following Brent option contracts: Brent Crude Futures-Style Margin Option (BZO), Brent Crude Oil Option (OS), and Brent Last Day Financial European Option (BE). The last trade date for the expiring options and the settlement prices of the underlying Futures contracts will remain the 25th; however, the option assignment processing and reporting will occur on Friday, November 26th. The option assignment will use settlement prices from November 25th to determine moneyness, and final mark to market for the end of day clearing cycle will use settlement prices from November 26th as normal.

Big moves keep changing Europe’s CCP scene
Alexander Kristofersson – Posttrade360.com
On stage with PostTrade 360° Amsterdam on 13 October, EuroCCP’s Jan Treuren shared his company’s outlook on the fast-changing clearing landscape – where it is not always clear who is a partner and who is a competitor.After EuroCCP was fully taken over by US-based derivatives exchange group Cboe last year, Cboe has this autumn launched a pan-European derivatives exchange, based in Amsterdam – and EuroCCP has expanded its product scope from equities to derivatives to cater for its clearing services.

Argentinian Futures and Options Exchange Readies Bitcoin Index Move
Argentina’s Futures and Options Exchange says it is taking “tentative crypto steps” – and could be set to follow the American bitcoin (BTC) exchange-traded fund (ETF) rush.
Per La Capital, the Rosario-based exchange, known as the Matba Roflex, has put forward a “Bitcoin Index” proposal to create a futures and options contract. The bid will be mulled by the regulatory National Securities Commission.


Quantitative Brokers expands Striker to create first two-in-one algorithm; Newly expanded algo now allows traders to seek out, display, and trade in-between minimum exchange tick increments alongside existing capabilities.
Annabel Smith – The Trade
Quantitative Brokers has expanded the remit of its Striker options on futures algo to create the first two-in-one algorithm in the marketplace. Following the update, the Striker 2.0 algo allows traders to seek out, display, and trade in-between minimum exchange tick increments, alongside Striker’s existing capabilities that allow traders to participate in exchange increments.


Don’t Overlook These 4 Steps When Measuring Investors’ Risk Tolerance
Jonathan I. Shenkman – Barron’s
Determining a client’s risk tolerance typically involves assessing their time horizon, conducting a frank discussion about market volatility, and having them fill out a risk tolerance questionnaire. The advisor considers the information gathered from these avenues and creates a portfolio designed to achieve their client’s goals.

Launch of Bitcoin ETFs Could Worsen Crypto’s Existing Volatility Problem
The law of unintended consequences makes it so that a positive impact in one place has a negative ripple effect somewhere else.
It may be the case that bitcoin-mania, as it were, and its wider acceptance (and availability) on Wall Street may give rise to speedbumps that impede cryptos’ presence within mainstream commerce.
To that end, we’ve seen the first bitcoin exchange traded fund (ETF) come to market this week, where, as CNBC reported, the ProShares ETF saw brought in $550 million in fund inflows in its first day, representing a record for ETF launches. In terms of the mechanics of the fund, ProShares (and of course other ETFs) invests in what are known as futures contracts, which are agreement to buy or sell bitcoin at an agreed-upon price, at an agreed upon future date (say, three months from now).

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