Mystery traders target 50% drop in Tesla shares within a month

CNBC
Updated
As Wall Street turns on Tesla, options traders are rushing to buy protection. Here's how much downside investors expect.

Wall Street is turning on Tesla(TSLA).

Just this week, three major firms — Wedbush, Citi, and Morgan Stanley — have slashed their price targets on the electric car maker, citing a mix of demand and growth concerns.

The options market is turning on the stock, too, says Todd Gordon, founder of TradingAnalysis.com. He sees a rush of investors making bearish bets on Tesla over the next month.

"Looking out at the options market, looking at the open interest, the amount of contracts open at particular strikes in the June monthlies … a significant amount at the $180 put strike, there's 11,000 contracts open as we recorded this video. Below that at $150 strike, 9,000 and here's what's concerning, there's 31,000 contracts outstanding at the $100 level," Gordon told CNBC's "Trading Nation" on Thursday.

Those open contracts at the $100 strike price indicate a large number of options investors are protecting against further downside for the stock before the June expiration. A move down to that level implied 49% downside from Thursday's close of $196.

"I don't know if Tesla is going to break down $95 from here in the next 29 days, just something to keep an eye on here," he said. "In terms of other technical levels, option market levels aside, you have a significant low here right around the $142. That I think is reasonable if this downside momentum continues."

That downside could accelerate if Tesla breaks through $180, the old lows Gordon identifies from 2016 and 2017. It needs to fall another 8% before reaching $180, and another 21% to take it to $142. It would mark a $247 per-share loss from its record set back in September 2017.

"Now keep in mind, we have a stock market that is also entangled in tariff wars. The S&P is under pressure so you're getting selling pressure from that side as well," said Gordon.

Tesla is the worst performer on the Nasdaq 100 this year, with a 41% loss. It has shed $23 billion in market cap.