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Trina Solar Limited (ADR) (TSL) Bulls Unaffected By Brief Sell-Off

TSL's June 2014 16-strike call saw buy-to-open activity on Monday

by 12/10/2013 11:34 AM
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Option Brief: Trina Solar Limited (ADR) (NYSE:TSL) saw a rush of activity in its options pits yesterday, as the stock sold off amid concerning headlines out of China. By the time the dust settled, around 31,000 contracts had crossed the tape, nearly five times the average daily volume. The most sought-after position was TSL's June 2014 16-strike call, which saw 12,595 contracts -- including several mid-sized blocks -- changed hands, almost all of which did so on the ask side. Implied volatility soared 12.5 percentage points on the day, and open interest added 11,910 positions overnight, making it safe to assume that a fresh batch of bullish bets was initiated.

TSL was trading north of $16 on an intraday basis as recently as Nov. 22, and the options market is unsure whether the stock will be back above this mark when the calls expire in June. At last check, delta for the out-of-the-money call was docked at 0.46, suggesting a 46% chance of an in-the-money finish. Should Trina Solar Limited fail to take out this overhead area over the next six-plus months, the most yesterday's call buyers have risked is the initial premium paid. According to Trade-Alert, the volume-weighted average price for the calls was $1.57.

On the charts, TSL has had a standout year, with the shares up roughly 180%. The equity shed almost 8% yesterday after reports indicated China wants extra gigawatts (GW) set aside for residential projects in its 2014 solar panel project, as opposed to the more profitable utility scale installations. However, Trina Solar Limited (ADR) (NYSE:TSL) found a foothold atop the $11.50 mark -- an area that served as support in September -- and has taken a solid bounce today. At last check, the stock was up 5.1% to trade at $12.16.


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