Tesla Bulls Bet Big Ahead of Stock Split

A dizzying rally in Tesla Inc.’s TSLA -0.99% shares has unleashed a burst of options activity tied to the stock jumping even higher.

Tesla recently said it would enact a 5-for-1 stock split, making its wildly popular stock even more accessible to individual investors. Trading on a split-adjusted basis will go into effect Monday.

So far, though, access to Tesla stock doesn’t appear to be a problem. Since Aug. 11 when the company unveiled plans for the split, shares have jumped 63%, building on an already impressive surge this year and bringing its market value to more than $400 billion. Tesla shares have more than quintupled this year and closed at $2238.75 Thursday, a record.

Investors have been scooping up call options tied to the shares’ continued advance. The ratio of put options bought relative to call options on Tesla hit a record low on Aug. 21, according to Garrett DeSimone, head of quantitative research at data provider OptionMetrics. Mr. DeSimone analyzed Tesla options that are out-of-the-money, or far from the current stock levels.

Some of the most actively traded options contracts in recent days have been bullish calls tied to the shares jumping even higher, to $2400 or $2500, Trade Alert data show.

Call options give investors the right, but not the obligation, to buy shares at a specific price later in time. Puts confer the right to sell.

Options are derivatives contracts that can be used to make directional bets on individual stocks and indexes, or to hedge portfolios from declines.

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