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Call and Put Traders Bet on Clean Energy Fuels

CLNE's low implied volatility has sparked some recent buy-to-open activity

by 7/3/2012 10:48 AM
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Despite an historically low volume week for U.S. equities, Clean Energy Fuels Corp. (NASDAQ:CLNE - 16.60) has been targeted by option players. The accelerated activity may have been due to last Friday's announcement that the natural gas concern will be adding five new trucking companies to its current fleet. Traders scooped up around 4,300 puts during the course of Monday's session, representing two times the average daily volume for put options. Calls were in hot demand, as well, with roughly 4,800 contracts crossing the tape, or 1.7 times the norm.

The September 16 put emerged as the crowd favorite, with 1,040 contracts being traded at this strike. With 81% of the bets crossing at the ask price, and open interest jumping by 745 contracts overnight, it's safe to say that new bearish positions were opened here on Monday.

With CLNE currently trading around $16.60, the stock will need to slide more than 3.5% by September expiration in order for these contracts to be profitable. Should this happen, these bearish bettors will begin to profit with each step south of $16 (less the premium paid) CLNE makes by the closing bell on September 21. If the equity fails to breach this level, the most the traders stand to lose is the initial premium paid.

Monday's put popularity is a change of pace for CLNE. The stock sports a 10-day International Securities Exchange (ISE)/Chicago Board Options Exchange (CBOE)/NASDAQ OMX PHLX (PHLX) call/put volume ratio of 7.96. This ratio ranks in the 79th percentile of its annual range, indicating that calls have been bought to open over puts at a faster-than-usual pace in recent weeks.

CLNE's current implied volatility trend sheds some light on the propensity toward buy-to-open call and put activity on the stock. The security's Schaeffer's Volatility Index (SVI) of 46% ranks lower than 87% of other such readings taken in the last year. Additionally, the equity's Schaeffer's Volatility Scorecard (SVS) is perched at a lofty 87. These two indicators combined suggest CLNE's near-term options are relatively inexpensive compared to the likelihood of a big move by the stock.

Technically speaking, CLNE has added a formidable 32.7% in 2012. However, after tagging an all-time high of $24.75 on March 21, the equity took 10-week tumble, losing nearly half its value in that time. The stock has staged a respectable rebound over the past month, adding 28.5% since June 4. What's more, the security has outperformed the broader S&P 500 Index (SPX) by almost 14% in the last 20 sessions.

Taking CLNE's technical backdrop into consideration, a case can be made on both the put and the call side of the aisle. Clean Energy is tentatively scheduled to unveil its second-quarter earnings results in mid-August. The company has a mixed history in the confessional, falling short of analysts' expectations in two of the last four quarters. Monday's proclivity for puts may reflect a growing anxiety among option players ahead of earnings.

On the flip side, the recent influx of buy-to-open call activity may simply be shareholders picking up hedges in light of the stock's recent rebound. Short sellers increased their bearish exposure on the stock by 13.8% during the most recent reporting period, and short interest now accounts for 30.2% of the stock's float.

At last check, CLNE had muscled almost 2% higher in today's session, to hover near $16.60.
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