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Clean Energy Fuels Attracts Short-Term Option Bulls

CLNE option traders are calling for more upside

by 11/13/2012 12:49 PM
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The shares of Clean Energy Fuels Corp. (NASDAQ:CLNE - 12.35) are soaring in afternoon trading, and it appears option players think the security has more gas in the tank. Around midday, CLNE has seen roughly 5,100 calls cross the tape -- about seven times its average intraday call volume, and more than three times the number of puts traded on the natural gas concern.

Most of the action has centered around the November 13 call, which has seen more than 1,200 contracts change hands on open interest of around 1,100 contracts -- a sign that new positions are being added. Plus, 95% of the calls have crossed at the ask price, suggesting they were bought.

By purchasing the calls to open, the buyers are expecting CLNE to topple the $13 level by Friday's close, when November-dated options expire. More specifically, the volume-weighted average price (VWAP) of the calls is $0.08, indicating a breakeven level of $13.08 (strike plus average premium paid). However, even if the stock remains south of this area -- home to its descending 10-week and 20-week moving averages -- the buyers' maximum risk is capped at the premium paid at initiation.

From a broader sentiment standpoint, today's appetite for bullish bets runs counter to the growing trend. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the security's 10-day put/call volume ratio of 0.31 ranks in the 75th percentile of its annual range. Or, in simpler terms, option buyers have scooped up CLNE puts over calls at a quicker-than-usual step during the past two weeks.

In similar fashion, short interest edged 6.1% higher during the past month, and now accounts for nearly two-thirds of CLNE's total available float. In fact, at the stock's average daily trading volume, it would take nearly 19 sessions to repurchase all of these pessimistic positions.

Against this backdrop, it's possible that the shorts are behind today's affinity for out-of-the-money calls on CLNE. By purchasing the calls, short sellers can hedge their bearish bets, should the stock extend today's climb through the end of the week.

And speaking of CLNE's ascent, the shares have muscled roughly 11.7% higher so far today, after the firm announced a collaboration with General Electric (NYSE:GE) to expand domestic infrastructure for natural gas transportation. As alluded to earlier, though, the equity is still staring up at its 10-week and 20-week trendlines, which have ushered CLNE lower since mid-April.

Weekly Chart of CLNE since April 2012 With 10-Week and 20-Week Moving Averages


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