Shorts Cheering Latest Tesla Setback

Bernstein: 'We remain skeptical' on Model 3 margins

Tesla Inc (NASDAQ:TSLA) stock is bucking the broad-market trend higher today, down 0.8% to trade at $289. While sector peers such as General Motors (GM) enjoy an automaker bump related to encouraging events in China, last night the electric car company temporarily halted its Model 3 production in Fremont, California. Bernstein chimed in on the beleaguered electric car company, with the analyst in coverage noting "we remain skeptical" about the Model 3's gross margins and build quality. The analyst also reiterated a "market perform" rating and $265 price target for TSLA stock.

Tesla stock has given back10% in the last month. The shares touched an annual low of $244.59 on April 2, just days after wrapping up their worst month in years, and the subsequent bounce was stymied by their 30-day moving average.

Short sellers are cheering the security's latest struggles. Short interest increased by 11.8% during the most recent reporting period, to 31.73 million shares, the highest amount since May 2017. This represents a whopping one-quarter of TSLA's total available float.

Options traders have been put-skewed lately, too. The security has a 10-day put/call volume ratio of 1.17 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This reading ranks in the 100th percentile of its annual range, indicating Tesla put buying has never been more popular relative to call buying over the past year.

Digging deeper, the April 290 put has seen notable put open interest added during this time frame. This strike is now home to peak put open interest in the soon-to-expire series, with more than 8,500 contracts outstanding. Those buying the puts to open expect Tesla stock to keep sinking south of $290 this week.

Options traders looking to bet on Tesla's next leg lower will have to pay up, though. TSLA's 30-day implied volatility skew of 24% ranks in the 96th annual percentile, indicating near-term put options are pricing in higher volatility expectations than their call counterparts at the moment.