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It's been quite a week for Canadian Solar Inc. (NASDAQ:CSIQ), thanks to a strong second-quarter earnings report and subsequent round of bullish brokerage notes. Since last Friday's close, specifically, the stock has rallied more than 28% to trade at $32.56. Against this backdrop, CSIQ option volume soared to four times the average daily pace yesterday, yet speculators continued to take a skeptical tone toward the stock.
Specifically, buy-to-open activity occurred at the equity's October 31 put -- which saw the largest increase in open interest overnight. These puts were purchased for a volume-weighted average price (VWAP) of $3.58, making at-expiration breakeven $27.42 (strike less VWAP). Gains will accrue on a move down to zero, while losses are capped at 100% of the premium paid, should CSIQ settle north of the strike at the close on Friday, Oct. 17, when the options expire.
Elsewhere, sell-to-open action was detected at CSIQ's weekly 8/22 33-strike call. By writing these calls, the traders expect CSIQ to remain south of $33 through next Friday's close, allowing the contracts to expire out of the money, and the speculators to retain the initial credit collected as their full potential reward. Yesterday, the stock rallied up to $32.86, before finishing the session at $32.40. If Canadian Solar Inc. (NASDAQ:CSIQ) manages to topple the strike over the next week, though, the call sellers may be at risk of assignment, and face theoretically unlimited losses.