Contrarian Wednesday: Storing Profits with SolarCity Options

It is another contrarian Wednesday and I am looking at making some mid-week profitable trades with a stock that is trading differently from the general market direction. Today we explore the options of SolarCity Corp (NASDAQ:SCTY).

SolarCity with its market capitalization of $6.04B is engaged in the design, installation and sale or lease of solar energy systems to residential and commercial customers, or sale of electricity generated by solar energy systems to customers. The company’s solar energy products include Solar Energy Systems, and SolarLease and power purchase agreement finance products. The company’s energy efficiency products and services include home energy evaluation and energy efficiency upgrades.

Why I’m Excited about SCTY Options

  • An Exciting Rollercoaster Ride

SCTY Stockchart

Few stocks can match the excitement that SolarCity has given traders and investors in the way it has traded this year as the chart above shows. The stock started the year around $57 per share and then it spiked to $85 per share around March. It wasn’t long before it dropped below $48 per share toward the middle of the year before it started another bullish ascent to the current $64.84 share price.

Interestingly, the stock is now starting another bullish ascent as it gained 7.35% to $64.84 as at 10:56AM EDT. More interesting is the fact that the stock currently trades at a 6.9% discount to its 50-day moving average. In addition, the stocks has an RSI index of 40.19, which indicates that the stock just left “Sell” territory as it moves into the “Buy” territory.

  • Strategic Partnership of Like Minds

SolarCity is without any doubt a trailblazer in its industry as it seeks to rethink what falls within the realms of possibility in the energy industry. However, a solar panel is useful in itself only when the sun is shining after which its usefulness becomes questionable. Interestingly, solar panels when combined with batteries for energy storage can deliver impressive energy solutions beyond expectations. However, the major challenge is how to obtain a battery with enough capacity to meet energy needs and within the realms of affordability.

SolarCity seeks to solve the problem of energy storage within the realms of affordability by working with Tesla Motors (NASDAQ:TSLA), a company working towards developing cheaper and stronger batteries for its electric cars in its Gigafactory project. The deal between the two companies was first announced last year and the deal has moved forward at an impressive speed.

For one, Tesla has selected Nevada for the Gigafactory as it plans to roll out the first set of batteries in 2020. SolarCity has earlier projected that its solar-power systems will come equipped with a battery-storage system within the next 5 to 10 years. However, judging by the rate at which the Gigafactory is progressing, we can expect SolarCity to deliver energy storage within a shorter timeframe.

We cannot discountenance the fact that Solarcity and Tesla Motors have the same chairman of the board. Hence, we can expect the deal to continue as expected. The best part is that we can expect a consistent stream of positive update on the deal and Gigafactory, all of which continue to generate positive buzz for SolarCity for increased gains in the share price.

How to trade SCTY Options

I am attracted to SolarCity’s strong momentum, which provides the perfect opportunity to record impressive gains if you jump in on the stock at the right time. I strongly believe that the stock is just starting out with another lease at bullishness and this is the best time to buy SCTY calls. I am buying the SCTY Jan 2015 67.500 call (SCTY150117C00067500) at an asking price of $6.80 per contract as the stock surges to previous highs.

 

— Daily Option Alerts

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