Yes, but timidly. I'm a little puzzled why those on here that are pretty sure the deal is going through aren't considering picking up a modest amount of SCTY nov or dec calls?
Same. I am talking with friends about exactly this.
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Yes, but timidly. I'm a little puzzled why those on here that are pretty sure the deal is going through aren't considering picking up a modest amount of SCTY nov or dec calls?
...except that you don't get standard TSLA options. This is important to remember. 1 SCTY contract (100 shares SCTY deliverable) becomes 1 TSLA1 contract (11 shares TSLA deliverable). Basically you end up with mini-options. They can be very thinly traded, so don't expect to be able to get out of your positions before expiration without paying a lot to the market makers.
Only if they are very deep in the money (like almost 50%), as any remaining time-value will be lost.Couldn't you just overcome this issue by converting and then selling the shares?
Yes, but timidly. I'm a little puzzled why those on here that are pretty sure the deal is going through aren't considering picking up a modest amount of SCTY nov or dec calls?
I'm doing exactly that. My reasoning is the following: The Jan 17 SCTY calls at the money should roughly double if the merger goes through (provided TSLA stays where it is and the decision will be not too far into the future, in which case the calls would lose much of their time value).Same. I am talking with friends about exactly this.
It's a timing issue for me- I'm not confident on the timing of the eventual merger- So making up for the short term leveraged play with significant stock buys- I'm typically long term only and the discount on long term hold of TSLA via proxy is sweet for my taste
I'm doing exactly that. My reasoning is the following: The Jan 17 SCTY calls at the money should roughly double if the merger goes through (provided TSLA stays where it is and the decision will be not too far into the future, in which case the calls would lose much of their time value).
Risks are:
- If merger does not go through, calls are likely toast
- if the merger is delayed significantly the calls might be toast as well or lose most of their time value
- if TSLA tanks calls might be toast
- there might be others that I don't have on my radar...?
chances are:
- if merger goes through within the next very few weeks it's a quick 100% return
- if TSLA increases (imo in the cards, provided everything we know) the return might be higher than 100%
I think this trade is risky, but for my risk profile and view the chances seem to outweigh the risks. That's why I'm in. I am not betting the farm, but more than small change....
I'm using a combination of slightly out of the money Jan 16 and Jan 17 calls (in the money if converted to TSLA options at current valuation), to leave room for the possibility that the deal might be delayed significantly.
Are you concerned about the vote being pushed into next year? Because i was under the impression that the vote will likely happen and be released in q4, but the actual execution of the merger could be pushed into early next year. For the purpose of the calls, it seems like as soon as vote details are released, the arbitrage has to disappear at this point?
It seems to me that a straddle is pretty close to risk free. If the merger goes through your gain should be sufficient to profit on the entire trade.Same. I am talking with friends about exactly this.
I'm not so sure about that. Puts in SCTY are pretty expensive.It seems to me that a straddle is pretty close to risk free. If the merger goes through your gain should be sufficient to profit on the entire trade.
I agree. But if it DOES go through the proceeds from the call will probably not be enought to pay for the then worthless put (provided TSLA stays where it is)OTOH if it doesn't go through SCTY should decline enough to profit from your puts on the entire trade.
Probably not the most liquid options....but you can always (roughly - depending on the exact amount) offset it with standard-options.My concern is that if the merger does go through, can you sell Nov-Mar green SCTY calls, if you don't have the funds to buy TSLA shares?
Appreciate your insights! I think it's highly likely that the deal goes through, but I'm not so confident in the timing, so I wouldn't bet on the positive merger vote release too soon . The 4 court cases seem to further delay everything. The uncertainty could stay in the market for even some weeks, withering away the time value of my calls. That's why I chose Jan 17 and even some Jan 18. If it happened that it becomes clear that the deal does NOT go through, then I lost time value unnecessarily, and in that case your strategy would have been better. If the deal is delayed by a few weeks, and the decision is moved to november or december, I think I'm better of with the Jan 17 calls.It seems like playing jan17 calls might almost be riskier on solarcity relative to nov or dec. You are paying for additional timevalue and it might just be best to play the good q3 results > increased institional confidence > positive merger vote release > stock bounces and arb closes. Close position while your ahead... don't have to worry about Q4 results end of year guidance, holiday breaks, shorts regrouping around debt FUD theme or whatever when initial q3 bounce euphoria wears off, ect. I should add that i'm not betting the farm on this but it could be a decent risk/reward modest play.
You can sell (close) the Mar options in November, December or January if necessary?It seems like playing jan17 calls might almost be riskier on solarcity relative to nov or dec. You are paying for additional timevalue and it might just be best to play the good q3 results > increased institional confidence > positive merger vote release > stock bounces and arb closes. Close position while your ahead... don't have to worry about Q4 results end of year guidance, holiday breaks, shorts regrouping around debt FUD theme or whatever when initial q3 bounce euphoria wears off, ect. I should add that i'm not betting the farm on this but it could be a decent risk/reward modest play.
Would you please explain what you mean?Probably not the most liquid options....but you can always (roughly - depending on the exact amount) offset it with standard-options.
sure. Let's say sameone buys 9 SCTY March 20 calls. After the merger they will be converted to odd March 181.82 TSLA calls with an odd multiplier of 11 (instead of the 100 for standard-options).You can sell (close) the Mar options in November, December or January if necessary?
Would you please explain what you mean?
This should read:So these 9 options entitle this person to buy 9 * 11 TSLA options for 181.82 each = 99 Options.
Immediately after the vote results are announced the SCTY SP should rise to 0.11 of TSLA? How long do we have after that before the SCTY options become the weird mixture? I think someone said that it would take about a month after the vote results are known to merge the companies. Does it take that long too switch the options?sure. Let's say sameone buys 9 SCTY March 20 calls. After the merger they will be converted to odd March 181.82 TSLA calls with an odd multiplier of 11 (instead of the 100 for standard-options).
So these 9 options entitle this person to buy 9 * 11 TSLA options for 181.82 each = 99 Options.
In a scenario where the arb closes in a positive way in nov or dec, do you think the spread on Mar options will be fair enough to make closing it out reasonable at that point?You can sell (close) the Mar options in November, December or January if necessary?
If the market doesn't see any other risk beside the vote, yes, then it should close that spread. BUT if there are still remaining uncertainties like lawsuits, SEC probings etc. then a spread will remain.Immediately after the vote results are announced the SCTY SP should rise to 0.11 of TSLA?
The options should switch around the same time when SCTY stock ceases to exist (being merged into TSLA). If everything goes according to plan, this could happen towards the end of the year.How long do we have after that before the SCTY options become the weird mixture? I think someone said that it would take about a month after the vote results are known to merge the companies. Does it take that long too switch the options?
Thanks!