My daughter provided some background:
I [she] was baffled by Tesla's rapid drop today and decided to probe a little deeper. I soon stumbled on this article:
Is This Why Tesla Just Plunged? | ZeroHedge - it seems someone bought 223,000 way OTM Tesla puts with a $20 strike for March. After reading it, I immediately remembered that I had recently (6th Feb) seen a tweet posted by Michael Burry (of the big short) regarding delta-gamma hedging:
https://twitter.com/michaeljburry/status/1357829213357711360. As most are aware, Burry is vocally short on Tesla.
In the article he links it says:
a) If NOPE is high negative — This means a ton of put buying, which means a lot of those puts are now worth more, and a lot of calls are now worth less/worth less (due to price decoherence). This means that to stay delta neutral, market makers need to sell/short more shares, pushing the stock price down.
Hello friends!
Burry was also tweeting about FSD earlier, so he was clearly doing some research. Maybe he wanted to try out this method of buying OTM puts in order to encourage market makers to sell off shares so that he could cover his short position? Maybe he just wanted to see if it works?
I don't know but the entire thing seems really off to me. Please let me know what you think.