Mike Khouw Says It's Time For Bearish Options Trade On Tesla

On CNBC's "Options Action," Mike Khouw suggested a bearish options trade in Tesla Inc TSLA. He wants to make a bearish bet in Tesla because the short interest has dropped considerably, the stock is trading at its all-time highs, and he says we have already seen the boosts that came in from the split and from the entrance in the S&P 500. He doesn't know who is going to be a marginal buyer, once all the indexes purchase the stock, and he thinks the valuation is very high.

When the stock was trading at $670, Khouw decided to sell the January $700/$720 call spread for a total credit of $7.50. The trade breaks even at $707.50 and it can maximally lose $12.50. The stock closed the session at $695.