On the Day Tesla Surpassed $1000, the $1000 Call Option Soared 24 Times

Tesla Stock Price 6-Month Trend [Image Source= Bloomberg]

[Asia Economy Reporter Park Byung-hee] As the stock price of the U.S. electric vehicle company Tesla surged, the price of call options also skyrocketed.

According to Bloomberg News on the 26th (local time), on the 25th when Tesla's stock price surpassed $1,000 for the first time in history, the price (premium) of the Tesla October call option with a strike price of $1,000 closed at $39.34 (approximately 45,961 KRW). The closing price of this call option on the 22nd was $1.60 (approximately 1,869 KRW). This represents a 2,359% surge in just one trading day. During the trading session on the 25th, this call option soared to as high as $59.50.

Although this call option closed at $33.40, down 15.1% on the 26th, it briefly surged to $99.80 during the session.

The U.S. October options expiration date is on the 29th.

As the expiration date approaches, the volatility of option prices increased, and with Tesla's stock price soaring, the call option prices skyrocketed. The $1,000 strike price call option requires Tesla's stock price to exceed $1,000 on the expiration date, the 29th, for the option to be exercised profitably. If Tesla's stock price falls below $1,000, investors lose their entire principal.

Just 11 days ago, Tesla's stock price was below $800. The $1,000 strike Tesla call option was considered a deep out-of-the-money option with a very low probability of being exercised. However, over the past two weeks, Tesla's stock price surged more than $200, and when the $1,000 strike call option turned into an in-the-money option on the 25th, buy orders surged, causing the price to skyrocket.

On that day, Tesla call option trading volume exceeded 2.4 million contracts, marking the highest level in 14 months. Nomura Securities estimated that Tesla call option investment amounted to $5.11 billion, while put option investment was $279 million.

On the 25th, Tesla's stock price rose sharply by $115.18 (12.66%) compared to the previous trading day, surpassing $1,000 for the first time in history and closing at $1,024.86. The news that rental car company Hertz ordered 100,000 Tesla vehicles acted as a positive catalyst.

Bloomberg analyzed that the so-called 'wag the dog' effect, where tail options shake the main stock price, could also be a cause of Tesla's sharp price increase that day. As Tesla's stock price rose significantly, a large volume of hedge positions linked to existing options contracts was liquidated, which may have caused the stock price to rise even further during this process.

This content was produced with the assistance of AI translation services.