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Yingli Green Energy Call Options Heat Up

YGE speculators are scooping up out-of-the-money call options

by 1/9/2013 11:33 AM
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Option bulls have taken a shine to Yingli Green Energy Hold. Co. Ltd. (ADR) (NYSE:YGE - 3.01) today, as encouraging news from China lifts the solar sector. In late-morning trading, YGE has seen roughly 5,600 calls change hands -- almost 20 times its average intraday call volume. For comparison, fewer than 300 YGE puts have exchanged thus far.

Most of the action has transpired at the out-of-the-money March 4 call, which has seen nearly 4,300 contracts cross the tape. More than two-thirds of the calls have traded at the ask price, and volume has surpassed open interest at the back-month strike, hinting at buy-to-open activity.

The calls changed hands at a volume-weighted average price (VWAP) of $0.15, meaning the buyers will profit if YGE conquers the $4.15 level (strike plus VWAP) within the next couple of months. This breakeven marker stands in territory not charted since March, and would require a rally of more than 38% from YGE's current perch. However, even if YGE fails to topple this strike, the most the buyers stand to lose is the initial premium paid for the calls.

Considering YGE has outperformed the broader S&P 500 Index (SPX) by more than 68 percentage points during the past three months, it's no surprise that today's appetite for bullish bets merely echoes the growing trend. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have bought to open more than 15 YGE calls for every put during the past 10 sessions. What's more, the stock's 10-day call/put volume ratio of 15.45 ranks in the 81st percentile of its annual range, implying that option traders are initiating optimistic positions at a faster-than-usual clip.

Technically, the shares of YGE have more than doubled since tagging a record low of $1.25 back in September, ushered higher atop their 10-day moving average. Now, the stock is attempting to solidify a foothold atop the $3 level, which acted as resistance from May to July.

In today's session, the security -- along with its sector peers -- is celebrating China's plans to more than double its solar power capacity in 2013 from 2012.


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