Very interesting SolarCity options activity. I think this might be part of the reason SolarCity is having trouble rallying.
I suspect far too many people believe there are four outcomes for SolarCity.
1) The merger happens at the aggreed upon ratio and SolarCity rallies to ~$25+
2) The ratio is reduced to reflect the volatility in the stock price. (I think this is very unlikely because Tesla would have to pay a very big penalty to SolarCity for changing the deal.
3) Elon and others parties take SolarCity private with the help of Bank of America, Fidelity, and/or possibly others, such as Google or Apple. SolarCity is then placed in a holding company alongside Tesla. This allows SolarCity to act as a part of "Tesla parent company" without becoming a part of Tesla Motors.
4) The merger doesn't happen, SolarCity goes bankrupt, and Tesla buys all parts that relate to why the Tesla-SolarCity merger makes a lot of sense.
(I think this is very unlikely. This would delay a lot of things Tesla and SolarCity wants to accomplish, would create a lot of very angry SolarCity customers and employees, and other parties would be able to bid on SolarCity. Also, it would hurt SolarCity and Tesla's brand and Elon's reputation. Also, it would become political fiasco going into a very significant election.)
The options market does not appear to be pricing in the merger happening, or appears to be pricing in it happening at a much lower ratio.
I think the offer explicitly states SolarCity options will be converted to Tesla options, with all fractional options being cashed out. In theory, SolarCity options should be about equal to Tesla options , accounting for the ratio, however there is a 10-30% difference depending on the options.
Question: If my SolarCity stock is down, am I able to realize the loss without triggering the wash sale rule if I've bought and or sold Tesla stock within 30 days of when the conversion takes place?