Investors piled in Tesla, Inc. (TSLA) call options that expire in less than two weeks at the at-the-money (ATM) strike price. The Barchart report shows that the volume of this contract is more than 223 times normal.
That’s one of the most outstanding volume/interest ratios we’ve ever seen. It means some investors see TSLA stock as undervalued.
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TSLA closed on $426.01 on Friday, May 22, it was up about 2.0%. Since releasing its Q1 earnings last month, TSLA stock is up 9.9% from $387.51. It rose more than 24% to a high of $343.05 on April 8, but fell from a recent high of $445.27 on May 13.
TSLA Stock – Last 3 Months – Barchart – As of May 22, 2026
This unusual call option volume means that many investors think TSLA stock could go higher.
This can be seen in today’s Barchart Uncommon Stock Options Activity Report. It shows that more than 35,000 call options traded on $427.50 the strike price of the call option for the period ending June 5, 13 days from now.
As mentioned, this volume is more than 223 times more than the previous number of remaining contracts, 157. In other words, some institutional investors piled into this two-week call option deal.
The premium paid was $13.30 in the middle, which means that buyers expect TSLA to rise to at least $440.80, or 3.47% top:
The point is that buyers of these phones expect TSLA to increase from here, even if they intend to use the phone options.
The delta ratio is over 50%, which means there is a very good chance that this will happen.
On the other hand, sellers of these calls, especially when done on a bundled call basis, make a good return: $13.30/$426.01 = 3.12% 2 weeks. If this repeats, it means a monthly yield of 6.24%. That is very attractive to short sellers.
Furthermore, even if TSLA rises to 427.50, investors will get a slightly higher return, due to capital gains (ie, 3.47% return on value).
Let’s take a look at why investors are willing to buy TSLA stock here.
Is TSLA Stock Still Undervalued?
Tesla’s revenue was up 16% YoY but down 10% from Q4 and down 20.3% on top of Q3. However, its gross margin rose to a record high of 21.1%, its highest ever, and its adjusted EBITDA (cash flow ratio) margin was also high at 16.4%.
However, due to heavy capex, free cash flow fell to $1.444 billion, below the Q3 peak of $3.99 billion. Nevertheless, this still represents a strong FCF margin of 6.45%. That beat last quarter’s 5.70% FCF margin, and was 88% higher than last year’s 3.43%.
The point is that the company takes more money out of its operations as the money grows. That means future FCF could be higher as analysts predict higher revenue.
For example, analysts surveyed by Yahoo! Finance now expects this year’s revenue to increase 7.86% to $102.28 billion and to increase 15.6% next year to $118.14 billion.
That means its FCF could rise to between $6.6 billion and $7.62 billion using its recent 6.45% FCF margin. The estimate is about $7.11 billion.
As a result, using the 1.0% FCF yield metric, which is common for tech stocks, means TSLA would be worth $711 billion. Even the highest valuation metric of 0.5% FCF yield:
$7.11b / 0.005 = $1,422 billionor $1.42 trillion
That’s still less than Tesla’s market value today of $1.6 trillion, according to Yahoo! Finance.
In other words, TSLA stock is overvalued by 11.1% (ie, $1.422 trillion / $1.6 tr -1), which means TSLA stock is fair. $378.61 per share.
Yahoo! The financial survey shows that the average analyst price (PT) is $411.89, while Barchart’s PT survey is just $401.77.
The bottom line is that TSLA stock looks great, unless the FCF margin rises significantly over the next two years.
What This Means for the Career of Uncommon Call Options
As a result, investors in these call options may want to ride the wave of momentum, not based on a less important scenario. They may hope to sell their call options at a higher price if TSLA’s recent spike continues.
In addition, call option sellers make excellent returns here, as shown above.
Either way, most investors should realize that this is a very speculative bet, either way. The risks of loss, from selling these calls (ie, if TSLA falls below earnings), or buying them, are very high.
As of the date of publication, Mark R. Hake, CFA did not have (directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is for informational purposes only. This article was originally published on Barchart.com
