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The solar sector is on fire today, and Canadian Solar Inc. (NASDAQ:CSIQ) is no exception. The stock was last seen 8.1% higher at $16.50, after touching a new two-year high of $16.65 in earlier trading. Against this backdrop, options traders are making a mad dash for CSIQ call contracts, in order to gamble on more short-term upside for the security.
In afternoon action, the stock has seen roughly 15,000 calls change hands -- nearly eight times its average intraday call volume, and close to 10 times the number of CSIQ puts exchanged. Reflecting the escalating demand for the options is the security's 30-day, at-the-money implied volatility (IV), which has skyrocketed 5.1 percentage points, or 7.8%, to 69.8%.
Most popular is the October 15 call, where nearly 7,000 contracts have crossed at a volume-weighted average price (VWAP) of $1.84. The majority of the calls traded on the ask side, and IV at the strike was last seen 6.2 percentage points higher, hinting at newly bought bullish bets.
To make money on the play, the buyers need CSIQ to extend its upward momentum over the next few weeks. More specifically, the traders will begin to profit if CSIQ topples $16.84 (strike price plus VWAP) by October options expiration. Risk, meanwhile, is limited to the initial premium paid for the calls, should the stock retreat beneath the strike.
That's not to say the calls are a bargain, though. The contracts' current IV of 67.9% stands higher than Canadian Solar Inc.'s (NASDAQ:CSIQ) one-month historical (realized) volatility of nearly 40%, suggesting the options are relatively pricey at the moment.
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