SolarCity Corp (SCTY) Option Traders Bet On Bigger Losses

It looks as if SolarCity Corp's (NASDAQ:SCTY) March 20 put is being bought to open today

by Karee Venema

Published on Mar 15, 2016 at 1:32 PM
Updated on Jun 24, 2020 at 10:16 AM

SolarCity Corp (NASDAQ:SCTY) speculators have shown a preference for puts over calls among options expiring in three months or less, per the solar stock's Schaeffer's put/call open interest ratio (SOIR) of 1.43. Not only does this show that near-term puts outweigh calls, but it ranks in the 77th annual percentile, meaning traders are more put-heavy than usual toward SCTY.

Looking back over the past 10 sessions, the stock's April 15 put has been popular among the short-term crowd. According to Trade-Alert, it appears the option has seen a mix of buying- and selling-to-open activity in recent weeks. For those buying to open the puts, the goal is for SCTY to breach $15 by April options expiration. Meanwhile, those selling to open the puts expect the strike price to serve as a short-term floor.

Today, the stock's front-month series is in focus, with the March 20 put SCTY's most active option thus far. It looks as if new positions are being purchased, meaning speculative players expect the security to breach the round-number $20 mark by this Friday's close, when the monthly March options expire.

Looking at the charts, SCTY spent nearly all of February trading south of $20 -- thanks to a mid-month earnings-induced bear gap. In fact, the stock was seen below this round-number level as recently as March 3. Regardless of where SCTY settles the week, though, the most the put buyers stand to lose is the initial premium paid. At last check, SCTY was down 0.4% at $26.84.

Elsewhere on Wall Street, sentiment is a little more upbeat. In fact, 11 out of 15 brokerages maintain a "buy" or better rating on SolarCity Corp (NASDAQ:SCTY), with not a single "sell" to be found. Should the shares widen their 47% year-over-year deficit, a fresh round of bearish brokerage notes could apply additional pressure.

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