Bears Take a Shine to Sinking SolarCity (SCTY)

SolarCity Corp (SCTY) is suffering a second straight day of steep losses

Oct 20, 2015 at 3:31 PM
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It's a bad day to be long the "Elon Musk portfolio," consisting of SolarCity Corp (NASDAQ:SCTY) and Tesla Motors Inc (NASDAQ:TSLA) -- two companies the tech visionary has founded. The stocks are down 4.6% and 7.2%, respectively -- the latter, despite some bullish brokerage attention earlier. As a result, both equities are seeing option traders place downside bets.

Drilling deeper on SCTY in particular, the two most active options are the weekly 10/23 40- and 40.50-strike puts. All signs point to buy-to-open activity, suggesting these speculators believe the stock will extend its losses south of the strikes through this Friday's close, when the weekly series expires.

This preference for bearish bets over bullish is business as usual for the solar stock. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), SCTY has racked up a top-heavy put/call volume ratio of 2.78. What's more, this ratio ranks above all but 10% of comparable readings from the past year.

Short sellers have been pounding the shares, too. A lofty 54.2% of SCTY's float is sold short, which would take nearly three weeks to cover, at typical volumes.

It's no wonder -- the security has been a technical dud. At $39.40, SolarCity Corp (NASDAQ:SCTY) has surrendered over one-quarter of its value in 2015. This week alone, the stock has plummeted almost 11%, sparked by a bearish initiation Monday morning.

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