Option Bulls Blast Sinking Sunedison Inc (SUNE)

Sunedison Inc (NYSE:SUNE) hit a 14-year low earlier today, but bullish options traders don't seem worried

Josh Selway

Feb 12, 2016 at 2:59 PM

VSLR
SUNE

In late 2007, solar energy stock Sunedison Inc (NYSE:SUNE) topped out at an all-time high of $96.08. Now, it's trading in penny stock territory. Today, SUNE has dropped 30% to trade at $1.43 -- and earlier touched a 14-year low of $1.37 -- on reports a New York judge has banned the company from making any "unusual" asset transfers. The solar company also has to attend a hearing to defend its acquisition of Vivint Solar Inc (NYSE:VSLR) next week. SUNE is now short-sale restricted, and options traders are taking notice.

Call volume is running at four times the norm in today's trading, with the weekly 2/26 2-strike call receiving a bulk of the attention. By the numbers, over 36,000 contracts have changed hands at this strike, while the second most popular option has just over 10,000 contracts cross. According to Trade-Alert, traders are initiating long positions here, meaning they expect the embattled solar stock to reclaim the $2 level before the contracts expire two weeks from today.

Yet high levels of call buying aren't unusual for SUNE speculators. Looking at data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), more than six calls have been bought to open for every put during the past two weeks. The resulting 10-day call/put volume ratio of 6.26 lands in the 84th annual percentile.

Outside of the options pits, short sellers have been cashing in their winning chips. During the two most recent reporting periods, short interest on SUNE fell by almost 15%. However, it still accounts for a lofty 37% of the equity's available float.

As if Sunedison Inc (NYSE:SUNE) -- and its sector peers -- haven't experienced enough trouble lately, more headwinds could be forthcoming. For instance, 73% of brokerage firms that cover SUNE say it's at least a "buy," and its consensus 12-month price target is $12.75 -- incredibly representing an almost 800% premium to current levels. Suffice it to say, it wouldn't be surprising if analysts slashed their expectations on SUNE. Looking ahead, the energy company is tentatively scheduled to report fourth-quarter earnings the week of Feb. 22.

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