Mike Khouw Sees Unusual Options Activity In Tesla

On CNBC's "Options Action", Mike Khouw spoke about Tesla, Inc. TSLA. The company is going to report earnings on Wednesday and Khouw noticed unusually high options activity ahead of the event. The options market is implying a move of 10 percent this week and that is in line with what it has done historically on earnings, said Khouw.

He noticed an interesting trade on Tuesday. There was a purchase of 1,000 contracts of the February 8 expiration, 345-strike calls. The trader paid around $3.50 for the calls, which sets the breakeven for the trade at $348.50 or 17.16 percent above the current market price. Khouw explained that a move of that size is rare, but it is not unprecedented. There were five moves of that magnitude or larger in Tesla. Khouw believes the trade could also be a hedge for one of the many traders with a short position.