Unusual Options Activity In Nio

Nio was founded in 2014 and is headquartered in Shanghai, China and already has financial backing from Baidu and Tencent. Nio had an initial public offering on the New York stock exchange in 2018 with the plan of using the money to ramp up production, launch new vehicles in China first, then worldwide.

Image result for nio cars

They had aggressive global long term plan of wanting to sell 50,000 vehicles by 2020 and 160,000 vehicles by 2025.  In the fourth quarter 2018 Nio delivered 7,980 cars, much higher than its delivery guidance of 6,700–7,000 units.  With China accounting for 30% of all the electric cars sold in the world, Nio was off to a great start.

But then Nio started issuing a weak car forecast than expected and delaying their plans 2-3 years to build their own factory due to the uncertainty of the China economy.

The company expects to deliver between only 3,500–3,800 car units in the first quarter of 2019.  CFO Louis T. Hsieh said that the company’s deliveries would likely be weak, at least through the first half of the year, due to uncertainty around China’s economy and the status of a government subsidy for buyers of electric vehicles. As a result, they have delayed their plans 2-3 years to build their own factory.

Nio’s weaker forecast ended up being right because In May, China posted the worst ever sales decline and it marked the 11th-consecutive monthly decline in car sales…thanks to the US-China trade war.

Lets fast forward to today.

NIO Inc., China’s home-grown answer to electric-car maker Tesla Inc., plunged after a worse-than-expected quarterly loss triggered thousands of job cuts and exacerbated concerns that a bubble in the world’s largest EV market may be bursting.

“People are wondering whether the company can continue to survive,” said Jason Chen, an analyst from Blue Lotus Capital Advisors. Bernstein analyst Robin Zhu struck a similar tone with a report titled “Tick Tock, Tick Tock,” estimating that NIO has only a few weeks of liquidity left.

NIO’s second-quarter net losses increased 83% from a year earlier to 3.29 billion yuan ($462 million), according to a statement. The deficit was worse than the 2.6 billion yuan average estimate of two analysts surveyed by Bloomberg, and it was the company’s second-largest based on available data dating back to 2017.


So it was no surprise that I notice usual options activity in Nio today where the Smart Money bought over 5000 Oct 4th put options with a strike price at $1.5. These options expire in 10 days and the Smart Money is betting that there is another at least 25% move to the downside.

And after price took out the most previous low, the probability of price hitting $1.50 is on the side of the Smart Money. Will they be right…stay tuned for this commercial break.

This post is my personal opinion. I’m not a financial advisor, this isn’t financial advise. Do your own research before making investment decisions.

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