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Bearish Speculation Heats Up on Clean Energy Fuels

Traders favored March-dated puts on CLNE last Friday

by 12/10/2012 9:55 AM
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Put activity ramped up on Clean Energy Fuels Corp. (NASDAQ:CLNE - 13.18) last Friday, with 2,169 contracts changing hands -- about 1.68 times the stock's average daily volume. By contrast, only 338 calls crossed the tape, representing just 15% of the norm. The day's most active strike was the March 13 put, where 1,159 contracts were traded. The majority of these options crossed at the ask price, indicating they were purchased, and open interest here rose over the weekend by 990 contracts. In other words, it's a safe bet that new puts were bought to open at this strike on Friday.

The volume-weighted average price (VWAP) on CLNE's March 13 put was $1.64. If a trader was able to buy in at this average price, his breakeven point would be $11.36 (strike price less premium paid). Based on Friday's close at $13.12, the average put buyer needs CLNE to shed more than 13.4% over the next three-plus months before he'll begin to see profits on his bearish play.

Taking a broader look at option-buying trends on CLNE, puts have clearly emerged as the contracts of choice. During the past 10 days, speculators on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open 1.01 puts for every call on the natural-gas stock. This ratio ranks above 96% of other such readings taken over the past year, suggesting that traders have purchased puts over calls at a faster clip only 4% of the time.

Short sellers are also betting on CLNE to slide. The number of shares sold short jumped by 8.4% during the past two reporting periods, and short interest now accounts for a hefty 33.3% of the stock's float. At CLNE's average daily trading volume, it would take more than nine days for all of these shorted shares to be repurchased.

CLNE has managed to collect a modest year-to-date gain of 5.3%, although the stock is down considerably from its March highs near the $25 level. During the short term, the $13.50 level could prove to be a tough challenge for the shares; this region is home to the stock's descending 120-day moving average, and effectively capped CLNE's progress throughout the final trading days of November.


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