Put Buying Picks Up as SolarCity Corporation (SCTY) Dives

SolarCity Corp (SCTY) traders anticipate a short-term move lower

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Published on Jan 6, 2015 at 1:34 PM
Updated on Apr 20, 2015 at 5:32 PM

SolarCity Corp (NASDAQ:SCTY) has dropped 4.6% to trade at $47.78, pressured by broad-market headwinds. This is more of the same for a stock that's pared about 46% of its value since touching a record high of $88.35 in late February. Accordingly, options traders have been upping the bearish ante in recent weeks.

During the past 10 days at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), SCTY has tallied a put/call volume ratio of 0.73 -- higher than more than three-quarters of similar readings from the last year. In like manner, the equity's Schaeffer's put/call open interest ratio (SOIR) of 0.91 ranks in the 87th annual percentile -- suggesting short-term speculators have rarely been so put-skewed.

Today, puts are crossing at a 16% mark-up to the normal intraday rate. Also, according to SCTY's 30-day at-the-money implied volatility -- which is up 3.1% to 56.6% -- short-term contracts have captured the attention of traders.

In fact, digging deeper, we discover the January 2015 48-strike put is by far the stock's most active option. From the looks of it, bearish bettors are initiating fresh long positions, expecting SolarCity Corp (NASDAQ:SCTY) to sustain its downward momentum through next Friday's close, when front-month options expire.

Daily Chart of SCTY since February 2014


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