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Thanks to an upgrade to "buy" from "sell" at Axiom Securities, JA Solar Holdings Co., Ltd. (ADR) (NASDAQ:JASO) is up 6.6% to $11.25 in early action, bringing its month-to-date gain to 9.6%. In fact, the stock is one of the top-performing Nasdaq-listed stocks (on a percentage basis) thus far. Ahead of the company's turn in the earnings confessional Monday morning, short-term options are in demand, with the security's 30-day at-the-money implied volatility (IV) 2.3% higher at 83.5%.
Unlike what we saw last week, calls are the options of choice today, with intraday volume running at three times the norm. More specifically, JASO has seen more than 6,200 calls cross the tape, compared to just over 300 puts.
Garnering the most attention has been the March 11 call, where more than 2,100 contracts traded -- 82% at the ask price, suggesting they were bought. Plus, IV on the front-month call is trending higher, hinting at fresh initiations.
By purchasing the calls at a volume-weighted average price (VWAP) of $0.73, the buyers expect JASO to be north of $11.73 (strike plus VWAP) at options expiration on Friday, March 21. Should JASO backpedal beneath the strike, however, risk is limited to the initial premium paid for the contracts. Of course, with a potential volatility-inducing event on the horizon, the equity's short-term options have grown more expensive. In fact, JASO's Schaeffer's Volatility Index (SVI) now sits at 94% -- in the 55th percentile of its annual range -- when it was 8 percentage points from an annual low just last week.
Historically speaking, JA Solar Holdings Co., Ltd. (ADR) (NASDAQ:JASO) has fallen short of Wall Street's bottom-line estimates in seven of the past eight quarters. Furthermore, the stock tends to make dramatic moves after earnings, including a single-day 70% jump in May 2013, and a one-week 12.5% decline after the firm's most recent report. Averaging the last eight earnings reactions, the shares are 1.6% higher in the subsequent week after reporting.