EARN25

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
facebook X logo linkedin


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.

160408scty

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.
 

You Don’t Need 25 Alerts -- You Need ONE You Can Trust!

That’s the idea behind Trade of the Week, Schaeffer’s newest trade alert.

Every Monday morning before the opening bell, you’ll receive a single, expertly researched trade recommendation -- built from the same proprietary research we’ve been using for over four decades.

It’s not just a signal.

It’s a plan designed for traders who are tired of jumping from alert to alert without ever finding their edge.

No juggling alerts. No switching directions mid-week. Just one clear, expertly researched trade idea -- delivered before the market even opens.

👉 JOIN RIGHT NOW FOR JUST $1 TO GET THE NEXT TRADE!