SolarCity Corp (SCTY) Option Traders Eye More Tesla-Induced Gains

SolarCity Corp (NASDAQ:SCTY) is higher today, on rumors Tesla Motors Inc's (NASDAQ:TSLA) Model 3 will feature solar panels

Mar 31, 2016 at 3:27 PM
facebook twitter linkedin


Anticipation surrounding Tesla Motors Inc's (NASDAQ:TSLA) Model 3 reveal is helping to lift a number of stocks today, and SolarCity Corp (NASDAQ:SCTY) is no exception. Specifically, the shares are up 6.1% at $24.74, as rumors swirl that a now-deleted tweet from TSLA CEO Elon Musk suggested the company's new low-priced electric car will feature SCTY solar panels. While option traders won't know for sure until tonight when the Model 3 prototype is unveiled, they are betting on SCTY to extend today's upside through tomorrow's close.

Taking a quick step back, SCTY calls are trading at 1.2 times the average intraday rate today -- with 16,000 contracts on the tape. The stock's weekly 4/1 series is commanding attention, with buy-to-open activity detected at the 22.50-, 25-, 25.50-, and 27-strike calls. By purchasing new positions, call buyers expect SCTY to settle tomorrow's session -- when the weekly series expires -- north of the respective strikes.

Widening the sentiment scope reveals options traders have shown a preference for long calls over puts in recent weeks. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), SCTY sports a top-heavy 20-day call/put volume ratio of 2.12. With 40% of the stock's float sold short, though, some of this call buying could be a result of shorts hedging against any unexpected upside.

In fact, today's positive price action marks a stark contrast to SCTY's longer-term trend. Since hitting its most recent high of $58.87 in mid-December, SolarCity Corp (NASDAQ:SCTY) has shed nearly 58%. What's more, today's rally is running out of steam near its 50-day moving average -- a trendline that has been ushering the stock lower since mid-January.

Sign up now for Schaeffer's Market Recap to get all the day's big stock movers, must-know technical  levels, and top economic stories straight to your inbox.

 

 

 

These investors are using the market's volatility to their advantage and scoring triple-digit gains on many of their trades.

Even in today's sideways bear market, this trading strategy has continued to provide consistency and profitability to a small group of investors. By using this approach, these traders are removing directional risk and still hitting triple-digit returns. If you want access to this strategy, and lower risk with higher returns sounds good to you, then don't wait another minute.

Join us now to receive our next trades the moment they come out!

 

Common mistakes options traders make
 


 


 
Special Offers from Schaeffer's Trading Partners