SCTY 72.5 April Calls

Hello!

I decided to separate explanatory and position posts. This will make the information a little less overwhelming. Hopefully, the educational posts will build a foundation for the position posts.



The Story:

I was looking for a trade idea to start the year. Picking a position is a little overwhelming sometimes, there is a lot of data/ information to try and break down. I like to read SeekingAlpha and MarketWatch when I am looking for ideas.

I stumbled on this article: The Solar Outlook for 2014.

I chose SolarCity over the other companies listed because it was not as prominent as FirstSolar and there was more potential for a breakout move.

After picking SCTY, I used FINVIZ to look at the chart, focusing on technical indicators

• SCTY was trading at $59.10, which was very close to the resistance level. Once a stock breaks the resistance level it will gain momentum causing a price jump

The Position: 

I wish I had the chart to show exactly what I was looking at but I don't :(

Anyways, the trendline indicated that if the resistance was broken the stock could rally to $70.

I picked an April expiration, a further expiration can cheapen the price of the option. After the expiration, I picked a strike price that was not too expensive but had a decent delta. 

• Strike price: What you expect the price to be in the future
• Delta: How much the options price is expected to change with the change in the actual stock
• For example the delta was .50, therefore for every 1 point move in SCTY stock the option changed by .50

After all the research I decided on buying two 72.5 April Calls the next morning (Monday).

On Monday Goldman Sachs upgraded SCTY and the stock hit all time high's. Even though the price was way higher than when I initially decided on the trade, the trendline still had momentum to go even higher.

I bought 2 72.5 April calls at $6.85. 

The Profit:

SCTY continued to trade higher. On Jan. 16th my options were priced at $11.75! Almost double my purchase price!!!! I sold my calls and the trade realized a $960 profit.

Although I was bullish on SCTY, the rally seemed a bit overdone and I did not want to lose out on collecting profits. The next day it was trading at close to $80 but today it is at $69.

Here is the chart of the duration of my trade

Thanks for reading!!!

I realize there was not a lot of explanations in this post, hopefully as I write more of the explanation posts the material will be easier to grasp. 

follow me on Twitter: @TheBritReport

Thanks,

Brit