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SunPower Corporation (SPWR) Traders Eye a Move Above $20

Calls have been popular on outperforming SPWR

by 5/13/2013 12:53 PM
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As SunPower Corporation (NASDAQ:SPWR) continues to trek higher, today's option traders are upping the bullish ante from last Friday's optimists. Of the 2,436 contracts traded at SPWR's May 20 call, more than half have crossed at the ask price, implied volatility has surged 29.1 percentage points, and volume is outstripping open interest. In summation, it appears that new positions are being initiated here today.

By purchasing these calls, traders expect SPWR to move north of the round-number $20 mark by Friday's close -- when front-month options expire. More specifically, the traders will begin to profit with each step above $21.08 (strike plus the volume-weighted average price of $1.08) the stock takes through week's end. This breakeven level represents expected upside of 10.1% from the equity's current perch at $19.14. While a move of this magnitude may seem grandiose for a stock with no scheduled events on the company calendar, it should be noted that SunPower has tacked on a brow-raising 41% this month.

SPWR's impressive run up the charts in May is just more of the same, with the stock sporting a year-to-date advance of 240%. It's no surprise, then, that long calls have been in favor among option traders. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), speculators have bought to open 32,592 calls during the past 50 sessions, compared to 4,647 puts, resulting in a call/put volume ratio of 7.01. This ratio ranks higher than 72% of similar readings taken in the past year, pointing to a healthier-than-usual appetite for calls over puts in recent months.

As such, SunPower Corporation's Schaeffer's put/call open interest ratio (SOIR) sits at 0.39. Not only does this show that call open interest more than doubles put open interest among options expiring in three months or less, but it ranks in 27th percentile of its annual range. In other words, short-term speculators are more call-heavy than usual toward SPWR.

As touched upon, the stock has been a standout on the charts in 2013. Further evidence of this technical tenacity was witnessed in today's session, with SunPower tagging a two-year peak of $19.50. Should the security fail to keep this momentum going through week's end, the most today's traders have on the line is the initial premium paid for the calls.


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