Tuesday, May 5, 2015

SCTY Analysis

Update 5/9/2015: My options position in SCTY expired without value for maximum profit. Shares rose 1.1% over three days, or a +139% annual rate. The options position produced a 100.0% yield on debit, for a +12,167% annual rate.

The solar energy hardware company SolarCity Corp. (SCTY), headquartered in San Mateo, California, publishes earnings after the closing bell on Tuesday.

I shall use the MAY2 Weeklys series of options, which trades for the last time three days hence on May 8.

The goal of my trades is to construct direction-neutral positions with a zone of profitability at expiration covering all of the one standard deviation range implied by volatility and options pricing, or the 30-day hourly chart support and resistance range, whichever is wider.

[SCTY in Wikipedia]



Click on chart to enlarge.
SCTY at 11:55 a.m. New York time, 30 days hourly bars
Implied volatility stands at 55.5%, which is 3.9 times the VIX, a measure of volatility of the S&P 500 index. SCTY’s volatility stands in the 71st percentile of its most recent rise.

Ranges implied by options and the chart
WeekSD1 68.2%SD2 95%Chart
Implied volatility 1 and 2 standard deviations; chart support and resistance

The Trade

Chart resistance is well below the upper boundary of the one standard deviation range. I'll focus on the latter in constructing the trade.

Iron condor short the $64 calls and long the $66 calls,
short the $57 puts and long the $55 puts
sold for a credit and expiring May 9
Probability of expiring out-of-the-money


The risk/reward ratio stands at 1.2:1. The premium is $0.88 ($0.44 for the calls and the puts).

Decision for My Account

I've opened a position in SCTY as described above.

-- Tim Bovee, Portland, Oregon, May 5, 2015


My volatility trading rules can be read here.


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Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

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Based on a work at www.timbovee.com.

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