Solar City and Clovis Oncology both reported earnings after the bell. One good, one bad.
Solar City posted a smaller than expected loss and bragged that business was surging due to "unprecedented demand." In Q1 SCTY installed 82 megawatts (MW) of solar panels. In Q2 it installed 107 MW. However, the company also booked orders in Q2 for an additional 218 MW. They added 30,000 customers in Q2 compared to 8,559 in the year ago quarter. To say the outlook is bright would be an understatement. They raised guidance for installation of 135-150 MW in Q3. They have installed panels for 141,034 customers to date and expect to reach one million customers by 2018 and 1 gigawatt of capacity by the end of 2016.
SCTY posts losses because it installs the panels on a 10-20 year payment plan from the users. SCTY benefits from selling the excess energy back into the electrical system and they receive a monthly utility payment from the users. Once the panels are paid off the monthly utility payment and the energy sold back into the system are 100% pure profit. At the end of the quarter they had $3.3 billion of contracted payments remaining. That was a 32% increase from Q1.
When they IPOed their cost per watt was $3.16 and that has fallen to $2.29 today. They are going to close on the acquisition of panel maker Silevo by the end of this month and that will drop their cost to $1.90 by the end of 2017. They are going to build a new giga-factory for panels right away according to Elon Musk. He likes that giga-factory term.
Shares rallied +2.77 during regular trading and another $3 after the close to $79. We had a long week two $65 put as insurance against an earnings disaster but that will no longer be necessary. The put expires on Friday and the bid declined to 6 cents after the SCTY earnings so there is no reason to sell it on Friday. It will expire worthless. We took in $10.05 in premium for the short Sept $75 put so we can easily absorb the premium loss on the insurance put.
Clovis reported earnings that missed by 8 cents but revenue beat thanks to milestone payments for drug progression successes. The company was very upbeat about a couple of drugs that are moving through studies and should be approved for sale in 2015. Shares did not trade in afterhours but I expect some fade on Friday.
We have a short Sept $65 put on WellCare (WCG) and that sector has come under fire in the last two weeks after several companies reported drastically higher drug costs. We also have a long August $60 put. I am recommending we close the short put and continue holding the long put.
The market is in profit taking mode as the events surrounding Ukraine appear to be heading for a Russian invasion. I expect S&P 1900 to be tested and possibly 1885. There is no panic in the market but sellers outnumber buyers today. I would continue to be cautious about adding new long positions until at least next week. Let's get past the weekend and see what the market is telling us.
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Long Term Positions
Click for 2014 Statistics through February
Click for 2013 Statistics
Current Position Changes
GBX - Greenbrier (Stopped)
Greenbrier collapsed on no news on Wednesday to stop us out at $62.45. As a big gainer in the first half I suspect this is a rotation move in a weak market.
Closed Sept $60 Put, entry $1.20, exit $1.99, -.79 loss.
APC - Anadarko Petroleum (Stopped)
Anadarko fell from $111 to exactly $106.50 on Wednesday on no news to stop us out at $106.50. The weak market is crushing any prior high flyers.
Stopped Sept $105 Put, entry $3.03, exit $4.00, -.97 loss.
AAPL - Apple Inc (Not Opened)
Apple gapped down on Tuesday morning to $94.36 with our stop loss at $94.45 so the play should not have been opened.
WCG - Wellcare Group (Close Short Put)
The insurance sector has been under attack over the last week after multiple companies warned their drug costs were rising drastically. I am recommending we close the short put and continue holding the long insurance put.
Close Sept $65 Put, enry $3.96, currently $6.20.
Continue holding long Aug $60 put, entry .80, currently .95.
SCTY - Solar City
Great earnings and the stock rallied to $78 in afterhours. No change in the play.
The Week Two $65 long put will expire worthless on Friday. Continue to hold the short position in the September $75 put.
Hold Sept $75 Put, entry $10.05, closed @ $6.05 but should be lower on Friday.
Week Two $65 put, entry $2.65, currently .06, will expire.
New Short Put Recommendations
New Covered Call Recommendations
New Aggressive Recommendations
New Long Term Recommendations
Existing Play Recommendations
Links to original play recommendation
CLVS - Clovis Oncology (Aggressive Covered Call)
CLVS - Clovis Oncology (Update Existing Position)
FB - Facebook (Long Term Short Put)
MOBI - Sky-Mobi Ltd (Covered Call)
PRAN - Prana Biotech (Short Put - Update)
SCTY - SolarCity (Aggressive Short Put)
NOW - ServiceNow (Aggressive Short Put)
GILD - Gilead Sciences (Short Put)
WCG - WellCare (Short Put)
GBX - Greenbrier (Short Put)
APC - Anadarko (Short Put)
AAPL - Apple Inc (Short Put)
There are several different formulas for determining margin requirements for naked put writing. These are normally broker specific and some can require larger margin requirements than others.
Here is the most common margin calculation for naked puts.
100% of the option premium + ((20% of the Underlying Market Value) - (OTM Value))
For simplicity of calculation simply use 20% of the underlying stock price and you will always be safe. ($25 stock * 20% = $5 margin)
Prices Quoted in Newsletter
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The prices quoted in the newsletter are the end of day prices in most cases.
When discussing fills or stops the prices quoted are the bid/ask at the time the entry trigger or exit stop is hit. This is NOT a price that someone on staff actually got using a live order.
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All of these rules normally produce worse prices than an active trader would normally get. Because they are standardized there may be some cases where a price quoted was better than an actual fill. If you received a price that was dramatically different than what was quoted please let us know.