NaughtyPines

SCTY -- NON-EARNINGS PREMIUM SELLING PLAY

NASDAQ:SCTY   SOLARCITY CORP
a year ago
With earning season quickly wrapping up, I'm look to put on a few high IVR/IV plays to bridge the gap between now and mid-January when the whole dog and pony show starts up again.

With an IVR/IV currently at 82/82 and having just announced earnings a few weeks ago, SCTY             is one of those possible plays. As usual, I will go short strangle:

Dec 31st 19/39 short strangle
POP%: 73%
Max Profit: $125
BPE: $290
BE's: 17.75/40.25

Naturally, the strikes and/or fill price may require some adjustment when the market opens. Me personally, I would like something above 1.00 credit ... .
a year ago
Comment: Gosh, this one's a wild one ... . Rolling my 19 short put strike all the way up to the Dec 31st 32 to capture an additional .49 credit on this upmove. Going to leave the short call alone for now ... .
a year ago
Comment: Yeesh. This lion cannot be tamed ... . Up more than $13, I'm being proactive and rolled my short put up to the 39 strike (same expiry) for an additional .82 in credit, creating a Dec 31st 39/39 short straddle.

I'm basically operating under the assumption at this point that I will either get assigned short shares at 39 or will close out the 39 short call and short the shares from current price. In either event, I will want to have a short put in place to begin increasing my cost basis in the shares (the opposite of what you do in a covered call situation).
a year ago
Comment: Basically what I'm doing here is waiting for price to settle somewhat before I do anything more with the call, the put or both. I'm mentally prepared to take an assignment of short shares at 39, but want to attempt to work the call up a few strikes via rolling, if at possilbe ... .
a year ago
Comment: Now that price has settled slightly below 57, I am going to roll the 39 short put above the 39 short call to the 57.5 strike and look to get a fill for a 5.47 credit (I will probably play with that figure come Monday open; the spread is quite wide at this point). This is called "going inverted" since the short put will be above the short call option. The ultimate effect of this will be to change the break evens for the setup to between 39 and 57.5 ... . So far, I've collected 1.17 in credit for the original setup plus an additional .82 for the roll of the short put to 39, for a total of 1.99. If I am successful in getting filled for 5.47 for the roll of the short put, I will have collected a total of 7.46 in credit, and that will basically be my break even for getting out of the trade for scratch at this point.
a year ago
Comment: Here's what I ended up doing: I tried to roll the entire setup as a unit to the Feb 15 expiry, but couldn't get a fill for the life of me, so I ended up rolling the short call to the Feb 15 39 for a .46 credit and the 39 short put to Feb 15 55 for a 7.35 credit, so it is now an "inverted strangle" (Feb 15 39 short call/55 short put). So, I've collected a total of 1.17 for the original strangle, .49 for the short put roll up to 32, .82 for the short put roll up to 39, .46 for the short call roll out to Feb 15 39, and 7.35 for the short put roll out and up to the Feb 15 55, for a grand total of 10.29. I'll now proceed to manage the trade by rolling the sides within that expiration, shooting for an improvement of strikes, as well as getting the trade to scratch ... .
a year ago
Comment: Proceeding to delta balance this one aggressively. Rolled the 55 short put to the 60 short put for an additional 3.32 in credit on this down move. It is bear getting filled at the mid price, which is a lesson in why you always want to go with the most liquid underlyings.
11 months ago
Comment: I'm waiting for the March expiry to become available to massage these strikes a little closer to current price ... .
11 months ago
Comment: Ultimately, I decided to leave the strikes where they were for the moment and roll farther out in time and the off chance I could get filled at the mid price, so I rolled the entire mess out to the April 15th expiry, inverted 39/60 short strangle for a 2.65 credit. I did look at trying to massage the 60 short put down, but couldn't move it more than 2 strikes and receive a credit, which just didn't seem worth it ... .
10 months ago
Comment: 20-20 hindsight says I got way too aggressive with rolling. You'll notice that if I'd just left the setup alone or rolled the short call out to the same strike, I would probably have been done with this trade by now. Nevertheless, I'm stuck with it, so I rolled way out in time to get the short put closer to current price and to balance the setup -- to the July 15th 23 short call/48 short put inverted strangle for a 1.41 credit. I'd way rather be short the 48 put than the 60 ... .
10 months ago
Comment: Rolling the 23/48 inverted strangle to the 18/46 within the same expiry for 1.63 credit. Collecting as much credit as I can when I can. Remarkably, this fierce hot mess has a 71% probability of max profit by expiration ... .
10 months ago
Comment: This is an underlying I'm beginning to learn to hate. That's what I get for not being mechanical with my rolling when the setup goes awry. Oh, well, water under the bridge ... . In any event, I did not like being inverted on the setup, so rolled within the same expiry to a 60/60 short straddle for an additional 2.00 credit, vowing to massage the setup mechanically from now on (yeah, right ... ).
NaughtyPines
a year ago
Filled for a 1.17 credit.
Reply
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