Schaeffer's Trading Floor Blog

Options Check-Up: Plug Power Inc, First Solar, Inc., and Molycorp Inc

Analyzing recent option activity on PLUG, FSLR, and MCP

by 8/29/2014 7:41 AM
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Among the stocks attracting attention from options traders lately are alternative energy concerns Plug Power Inc (NASDAQ:PLUG) and First Solar, Inc. (NASDAQ:FSLR), and rare-earths issue Molycorp Inc (NYSE:MCP). Below, we'll break down how options buyers are positioning themselves, and how much speculators are willing to pay for their bets on PLUG, FSLR, and MCP.

  • Since breaking through resistance in the $5 region in late July, PLUG has spent its time churning between $5.50 and $6.50, and on Thursday, the equity closed at the lower end of this range, at $5.55. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), option traders are betting on a breakout for the shares. Specifically, the security has racked up a 10-day call/put volume ratio of 7.41 on this trio of exchanges. With more than one-quarter of Plug Power Inc's float sold short, though, a portion of this activity could be a result of shorts hedging against any additional upside for a stock that's rallied roughly 258% year-to-date. Regardless, PLUG's front-month options can be purchased on the cheap, as the equity's Schaeffer's Volatility Index (SVI) of 64% ranks lower than all comparable readings taken in the past year.

  • FSLR has rallied around 84% over the past year, thanks to a handful of bounces off its rising 200-day moving average. On Thursday, the equity consolidated a portion of these gains amid a broad-market downturn, and finished the session 1.2% lower at $69.15. Given its longer-term uptrend, though, it's no surprise to see that long calls have been preferred over puts of late. The security's 10-day ISE/CBOE/PHLX call/put volume ratio of 4.59 ranks just 4 percentage points from an annual bullish peak. However, First Solar, Inc. is heavily shorted, too, sporting a short-interest-to-float ratio of 14.1%. So, it's entirely possible that some of this call buying is a result of shorts protecting their bearish bets against a continued rise. At present, FSLR's front-month options are pricing in the lowest volatility expectations of the year -- the stock's SVI of 33% ranks below all similar readings taken over the last 12 months.

  • It's been a terrible year for MCP, which has shed 69% in 2014 to churn near $1.74. Option traders on the ISE, CBOE, and PHLX are eyeing even more downside, as evidenced by the equity's 10-day put/call volume ratio of 2.44, which ranks at an annual peak. In the front-month series, specifically, peak put open interest is found at the in-the-money September 3 strike, where 11,757 contracts currently reside. Now is an opportune time to roll the dice on Molycorp Inc's near-term trajectory at a relative bargain, considering the security's SVI of 85% sits below 75% of other such readings taken in the past 52 weeks.

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Analyst Update: Amgen, Inc., J C Penney Company Inc, and Lululemon Athletica inc.

Analysts adjusted their ratings on AMGN, JCP, and LULU

by 8/28/2014 1:44 PM
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Analysts are weighing in today on biotech issue Amgen, Inc. (NASDAQ:AMGN), department store chain J C Penney Company Inc (NYSE:JCP), and yoga apparel maker Lululemon Athletica inc. (NASDAQ:LULU). Here's a quick look at today's brokerage notes on AMGN, JCP, and LULU.

  • AMGN announced that it's currently seeking regulatory approval in the U.S. for its cholesterol treatment evolocumab, following successful clinical trials. Deutsche Bank responded to the news by raising its price target on the shares to $163 from $160, helping lift Amgen, Inc. to a record high of $139.38. At last check, the stock was sitting slightly below this mark, at $138.70. Given this technical milestone, additional price-target hikes could be on the way. AMGN's average 12-month price target sits at $140.30, or 1.2% from the equity's current perch.

  • JCP has stumbled this afternoon, down 2.9% to trade at $10.88 following a downgrade to "neutral" from "buy" at BTIG. This is more of the same for the retailer, which has received 16 "hold" or worse ratings, compared to just two "buy" endorsements. Meanwhile, J C Penney Company Inc's consensus 12-month price target of $9.58 represents a discount to current trading levels. However, with the shares up nearly 19% on a year-to-date basis -- and outperforming the broader S&P 500 Index (SPX) by 27.6 percentage points during the previous three months -- a round of upgrades and/or price-target hikes is a possibility.

  • LULU is staring at a 2.5% deficit this afternoon, last seen at $40.44. This is typical of the shares, which are down 31.5% in 2014. Prompting today's negative price action was a downgrade to "neutral" from "buy" at D.A. Davidson, which also reduced the stock's price target to $44 from $46. Even from a broader perspective, Lululemon Athletica inc. is surrounded by negativity. Seventeen out of 25 covering analysts have given the equity a "hold" or worse rating, and 21.2% of LULU's float is sold short -- which would take nearly two weeks to buy back, given the stock's typical daily trading volume.

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Stocks On the Move: Digital Ally, Inc., Tekmira Pharmaceuticals Corporation, and Guess?, Inc.

DGLY, TKMR, and GES are moving sharply in Thursday's trading

by 8/28/2014 12:59 PM
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U.S. stocks are trading modestly lower this afternoon, with the major equity indexes paring their weekly gains amid rising geopolitical tensions. Among the names making notable moves are security and surveillance specialist Digital Ally, Inc. (NASDAQ:DGLY), biotech stock Tekmira Pharmaceuticals Corporation (NASDAQ:TKMR), and apparel company Guess?, Inc. (NYSE:GES). Here's a quick look at how DGLY, TKMR, and GES are faring on the charts today.

  • DGLY is on the move again today, up 36.1% at $15.63 after landing a $1.1 million order from the Michigan State Police. Digital Ally, Inc. could be benefiting from some short-covering activity, as 11.1% of the equity's float is sold short. However, despite touching an intraday high of $15.75, DGLY could struggle to finish above the $15 level today. The shares have challenged this region on multiple occasions over the past year, but they haven't settled a single day above $15 since September 2013.

  • TKMR has jumped 9.5% to trade at $21.62, as traders respond to reports suggesting the Ebola vaccine specialist could be a takeover target. Shares of Tekmira Pharmaceuticals Corporation have rallied roughly 171% year-to-date, and they're currently attempting to find their footing atop the recently troublesome $20 level. Analysts are expecting TKMR to clear this hurdle over the long run, as the stock's average 12-month price target weighs in at $26.96.

  • GES has taken a dive post-earnings, with the shares off 9.1% at $23.32 this afternoon. Guess?, Inc. has lost about one-quarter of its value in 2014, and is now staring up at the formerly supportive $25 level. In fact, the stock tagged a fresh annual low of $23.24 earlier in the session. The retailer's disappointing outlook has triggered price-target cuts today from no fewer than six brokerage firms, with particularly bearish notes rolling in from ISI Group and Mizuho Securities -- both of which lowered their targets to $22. Ahead of last night's earnings report, GES was already surrounded by skepticism. The security's short-to-float ratio stands at 12.1%, only one analyst out of seven deems it a "buy," and -- based on the Schaeffer's put/call open interest ratio (SOIR) of 2.01 -- puts more than double calls among options set to expire in three months.

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Analyst Downgrades: GT Advanced Technologies Inc, Seadrill Ltd, and Yingli Green Energy Hold. Co. Ltd. (ADR)

Analysts downwardly revised their ratings on GTAT, SDRL, and YGE

by 8/28/2014 9:13 AM
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Analysts are weighing in today on LED company GT Advanced Technologies Inc (NASDAQ:GTAT), offshore drilling contractor Seadrill Ltd (NYSE:SDRL), and China-based solar name Yingli Green Energy Hold. Co. Ltd. (ADR) (NYSE:YGE). Here's a quick roundup of today's bearish brokerage notes on GTAT, SDRL, and YGE.

  • GTAT has had a strong 2014, more than doubling in value to trade at $18.57. Nevertheless, Raymond James cut its rating on the stock to "underperform" from "market perform." Elsewhere, options traders have been drawn to GT Advanced Technologies Inc puts over calls. The equity's 50-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 0.53 stands at an annual high. These speculators aren't necessarily bearish, however -- some may be GTAT shareholders picking up puts to protect against a pullback in the technical outperformer.

  • SDRL got hammered yesterday in the wake of a second-quarter earnings miss. By session's end, the shares were off 2.8% at $36.63. On the Street, Cowen and Natixis responded by lowering their respective price targets to $32 (from $36) and NOK 203 (from NOK 218), while Societe Generale upped its target to NOK 217 (from NOK 198). Should Seadrill Ltd struggle in the aftermath of the pair of bearish notes, it could attract additional short selling. At present, 8% of the stock's float is sold short, which would take more than eight sessions to cover, at SDRL's average daily trading volume.

  • Finally, YGE has lost one-third of its value in 2014, and currently rests at $3.38. Just yesterday, the equity shed 5% of its value due to a poorly received second-quarter earnings report. Subsequently, Roth slashed its price target on Yingli Green Energy Hold. Co. Ltd. (ADR) to $3.50 from $4, to go along with a "neutral" rating. Additional price-target cuts could be on the way, as the shares' average 12-month price target of $4.89 stands at a nearly 45% premium to YGE's current perch.

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U.S. stock futures are lower this morning, pressured by rising tensions between Russia and Ukraine. In company news, today's stocks to watch include drug giant GlaxoSmithKline plc (ADR) (NYSE:GSK), discount retailer Dollar General Corp. (NYSE:DG), insurance company American International Group Inc (NYSE:AIG), and financial firm JPMorgan Chase & Co. (NYSE:JPM).

  • GlaxoSmithKline plc (ADR) (NYSE:GSK) is fast-tracking human trials of its experimental Ebola vaccine, with studies set to begin within the next few weeks in the U.S., U.K., Gambia, and Mali. GSK is also rushing the drug into production, in hopes of making doses immediately available to the World Health Organization (WHO) if the trials are a success. (The Guardian)

  • Dollar General Corp. (NYSE:DG) reported earnings this morning, and simultaneously said it's committed to pursuing a deal to acquire Family Dollar Stores, Inc. (NYSE:FDO). Last week, FDO rebuffed a $9 billion takeover attempt from DG, opting instead to accept a smaller offer from rival Dollar Tree, Inc. (NASDAQ:DLTR). (Reuters)

  • Robert Benmosche, the outgoing CEO of American International Group Inc (NYSE:AIG), told Bloomberg TV that he accelerated his retirement plans after doctors told him in May that he had only nine months to a year to live. The 70-year-old executive is handing over the AIG reins to Peter Hancock as of Sept. 1, after initially planning to keep the top job until early 2015. (Bloomberg)

  • The FBI is reportedly investigating recent cyberattacks against two to five major banks, including JPMorgan Chase & Co. (NYSE:JPM). Sources suggest the attacks were more sophisticated than most, with the breach going "far beyond the capability of ordinary criminal hackers." JPM acknowledged that companies of its size are subject to cyberattacks "nearly every day," but declined to offer any further details. (BBC News)

  • Actress Jessica Alba's The Honest Co. has raised $70 million toward an initial public offering, valuing the company at nearly $1 billion. Alba's co-founder, Brian Lee, says The Honest Co. -- which specializes in eco-friendly home goods and baby products -- is on pace to bring in more than $150 million in revenue this year. (USA Today)

  • In earnings news, Abercrombie & Fitch Co. (NYSE:ANF), Williams-Sonoma, Inc. (NYSE:WSM), and Guess?, Inc. (NYSE:GES) will be in focus today after reporting their latest quarterly results. (MarketWatch)

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