Everyone has heard the news that Tesla Motors (TSLA) has proposed a buyout of SolarCity (SCTY) in an share-for-share deal. The details are available here. The implied share-for-share ratio values SolarCity at $26.50 - $28.50 per share, which implies a 25% - 35% premium to today's closing price. The stock is already up almost 15% to $24.31, according to the latest market data:(Source: Google Finance)The implied merger spread is about 9% - 17%, which is high for deals, whose closing the market thinks is highly probable. The implied price range is significant, however, for one simple reason: Tesla Motors has established a floor value for SolarCity. This means that the market has a reference point in the very volatile environment solar stocks have been since the beginning of the year. In essence, this implies that the stock will not likely stay below $24 per share until there is more clarity about the deal (i.e. whether the BoD approves the valuation, and the green light is given). Hence, I realize that short-term calls will have a very high implied volatility until more information about the deal is available, in which case the outcome is binary: the stock will either rise closer to the proposed buyout range or collapse to $21 per share or lower (effectively, today's closing price). Keep in mind that SolarCity's weekly options are already expensive, without factoring in the most recent news:(Source: optionstrategist.com)The table above shows that SolarCity's current weekly options are more expensive than 75% of options traded in the past 600 trading days.While we cannot be 100% sure than longer-term options are also expensive, we can strongly assume that options with both short- and mid-term durations will gain in IV over the next few days. I also believe shorter-term duration options will have more IV built into their market values than the mid-term tenor options. I want to capitalize on that.My proposed trade is a calendar spread involving call options:(Source: optionsprofitcalculator.com)I like this trade for two reasons:(1) It is relatively cheap in dollar terms (only $67 per one pair), which means I am more flexible in constructing a position;(2) The risk-reward ratio is pretty high, while the "window of safety" is quite wide:(Source: optionsprofitcalculator.com)The above chart shows that, if the stock stays above $22.43 per share over the next month, I will pocket a return. The maximum return I can earn risking $67 per share is $144, if the stock closes at $26 at the position's expiry. This implies a 2.15:1 risk-reward ratio. In other words, as long as the buyout talks remain throughout July, I am in the black. Even if the stock ends up where it is right now, at $24.31 per share, I should make a ~100% return! And I like that. I do realize that options price will change tomorrow at market opening. Hence, you should run the above calculations again tomorrow to ensure that the risk-reward ratio stays within a reasonable deviation from what we have calculated today. Let me know what you think of this strategy in the comments section!