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SolarCity Corp (SCTY) Calls Hot as Tesla Buzz Builds

SolarCity Corp (NASDAQ:SCTY) has had a big week, and option traders are eyeing more upside

Apr 8, 2016 at 2:30 PM
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It's been a big week for SolarCity Corp (NASDAQ:SCTY), amid speculation over the firm's possible connection to Tesla Motors Inc's (NASDAQ:TSLA) yet-to-be unveiled Model Y -- a rumor only exacerbated by a recent tweet from Elon Musk. While this partnership has yet to be confirmed, SolarCity announced it has secured roughly $188 million in financing from Bank of America-Merrill Lynch for residential solar projects. Against this backdrop, SCTY is up 3.7% at $28.02, and the solar stock's options pits are buzzing.

By the numbers, 13,265 call options have traded so far -- a modest uptick to what's typically seen at this point in the day -- compared to 6,594 put options. Eleventh-hour option traders appear to be buying to open new positions at SCTY's weekly 4/8 29-strike call, as they bet on more upside through tonight's close, when the weekly series expires.

Meanwhile, it looks as if slightly longer-term option traders are purchasing new positions at SCTY's April 32 call. If this is indeed the case, the call buyers expect SCTY to rally north of $32.00 through next Friday's close, when front-month options expire.

Today's call-skewed session is nothing new for SCTY options traders. What's more, the stock's front-month gamma-weighted Schaeffer's put/call open interest ratio (SOIR) of 0.77 indicates near-the-money calls outweigh puts among options expiring in the April series.

In the past 10 sessions alone, SCTY's April 23 strike has seen the biggest rise in call open interest, with 2,543 contracts added. However, peak front-month call open interest is found at the April 30 strike, where 10,166 contracts reside. This round-number area could put pressure on the shares, as the hedges related to these bets unwind ahead of expiration.

In fact, although SCTY has had a standout week -- up around 16% so far -- the shares stopped topped out at an intraday peak of $29.43 earlier. What's more, the stock has failed to close north of $30 since Feb. 3. Longer term, the shares of SolarCity Corp (NASDAQ:SCTY) have shed 45% year-to-date.

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