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Solar-products concern SunPower Corporation (NASDAQ:SPWR) has been on the upswing this year -- and that's putting it mildly. On a relative-strength basis, the stock has trumped the S&P 500 Index (SPX) by a whopping 278 percentage points in 2013 alone, tacking on 256% in just the last six months to rest at $21.99. Option players are hoping to take advantage of continued strength in the shares, and are hopping into back-month speculative positions today.
Across the board, call volume is running at more than 2.5 times the normal pace, as around 6,600 contracts have been executed. More than one-third of this volume traded at the August 25 call, where over 2,600 contracts have changed hands -- the majority at the ask price. Volume easily exceeds open interest, and implied volatility has risen 3.6 percentage points, hinting at newly opened bullish bets on SPWR.
Because these calls traded for a volume-weighted average price (VWAP) of $1.38, the breakeven price (at expiration on Aug. 16) is $26.38, or the strike price plus the VWAP. This breakeven level is not only 20% north of current levels, but is also in territory SPWR has not traversed since November 2009. Should the stock fail to make this jump, call buyers have only risked the premium paid.
Not surprisingly, SPWR has been a long-time favorite of call buyers. The stock's 50-day call/put volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) weighs in at 4.33, meaning 433 calls have been bought to open for every 100 puts during the last 10 weeks. However, this ratio ranks lower than 64% of similar readings from the past year, signaling that demand for long calls is slightly below average, even as bullish bets trump their put counterparts by a healthy 4-to-1 margin.
The stock -- which has been consolidating around the $22 level since hitting a new multi-year high of $23.76 on May 21 -- is trading more than 2% higher today. Two days into July, the shares have gained nearly 6% month-to-date.