Worth noting that just before the Moody's downgrade, someone(s) bought an enormous amount of way-OTM April 250 puts starting a couple weeks before the event and continuing right up to the day before. (from my trading notes)
(About 4000 contracts)
Happened at this point on 3/14/18: (note red line at bottom - IV began to spike)
View attachment 310899
Here's the chart for the April 250p that day - almost 7k contracts bought in about an hour.
View attachment 310900
Seemed insane at the time, but time would eventually show that buyer knew something was going down.
But it didn't stop there. The next day ~
5000 more contracts were bought.
By 3/23/18, the open interest for April $250 puts was 14,518, and on 3/26/18, about
10,000 more were bought to open, when TSLA was at ~
$300, along with
4,000 May $250 puts.
It's worth noting that putting these positions on before a huge selloff serves to accelerate the downward momentum, as the other party in the transaction (a market maker selling you the puts) must re-hedge their position constantly as the price sinks - they do this for puts they sold by selling (shorting) shares of the underlying - TSLA in this case. The shorter the time to expiration - in this case less than a month, the more shares must be shorted as price drops to remain delta neutral.
The primary point of this post is that April $250 put trade only made sense if the person buying those
knew something was coming in the very near future that would plunge the stock below the major support at that time, around $290-300. Otherwise it's gambling with millions of dollars - and a far, far riskier version than that played by our resident bears here that own puts that expire in 2019 or 2020.
The outcome for that guy? A couple days after the Moody's downgrade, he rolled half his April $250 puts to May $250 puts, then sold those sometime before 4/3/2018. Likely made somewhere in excess of $10 million from an initial bet of $1-2 million, and did it in 2 weeks.
