Options Traders Bank On SolarCity Corp (SCTY) Burning Higher

SolarCity Corp (SCTY) has surged 14% this week

Apr 6, 2016 at 2:33 PM
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SolarCity Corp (NASDAQ:SCTY) options are flying off the shelves today. By the numbers, 23,000 calls are on the tape -- more than doubling the expected intraday pace -- while 16,000 puts have been exchanged. From the looks of it, at least one group of options traders are gambling on short-term upside for SCTY.

Taking a closer look, the solar stock's most active option is the weekly 4/8 30-strike call. All signs point to buy-to-open activity here, meaning traders think SCTY will topple the round-number $30 level by Friday's close, when the weekly series expires.

Call buyers haven't been shy in recent months. SCTY's 50-day call/put volume ratio across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) checks in at 1.47. Not only does this ratio mean long calls outstrip puts, it also rests above two-thirds of all comparable ratings from the past year -- suggesting options traders have been buying to open calls over puts at an accelerated clip.

Now appears to be an opportune time to purchase premium on short-term SCTY options. The stock's Schaeffer's Volatility Scorecard (SVS) checks in at 85. In other words, the shares have tended to make outsized moves on the charts over the past year, relative to what the options market has priced in.

Speaking of outsized moves, SolarCity Corp (NASDAQ:SCTY) has jumped 3.7% to trade at $27.72. While the stock has heated up this week -- up 14.2% since last Friday's close -- it's struggled mightily longer term. In fact, since SCTY's mid-December peak at $58.87, the shares have lost over half their value. If the stock resumes this trend lower, a mass exodus among option bulls could exert even more pressure.

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