Earnings Preview: Plug Power Inc and Canadian Solar Inc.

Alternative energy stocks Plug Power Inc (NASDAQ:PLUG) and Canadian Solar Inc. (NASDAQ:CSIQ) will release their earnings reports tomorrow

Mar 9, 2016 at 1:39 PM
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Several alternative energy stocks are reporting earnings this week, including Plug Power Inc (NASDAQ:PLUG) and Canadian Solar Inc. (NASDAQ:CSIQ). Both companies will present their earnings reports tomorrow morning, so let's see how traders have been situating themselves ahead of the events. 

Starting with PLUG, calls have been wildly popular relative to calls over the past 10 days at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), with speculators buying to open more than 5,200 contracts. Compare this to the 119 puts that were newly purchased during that same time period. Moreover, if you look at the options that have added the most open interest during the last two weeks, the top 10 are all calls.


A closer inspection of the data shows there's been heavy bullish activity on the 2.50 strike in the March and weekly 3/11 series. Based on information from the ISE, CBOE, and PHLX, traders have been buying to open these options in the hopes of PLUG topping $2.50 by the respective expiration dates.

We should point out, though, that almost one-fifth of PLUG's float is sold short, and it'd take bears a whopping 27 sessions to buy back their bets, at average daily volumes. So some of this call buying could be short sellers hedging their bets

Today, however, options bears have emerged, with puts crossing at 11 times the average intraday pace. One option that appears to be seeing buy-to-open activity is the weekly 3/11 2-strike put, as traders look for the shares to slide further beneath $2 by this Friday's close, when the contracts expire. 

Shifting back to tomorrow's PLUG earnings report, there are certainly big expectations, with the options market pricing in a nearly 19% single-session post-earnings move. Looking back, the stock has moved lower in the session following its last three releases, including two losses of over 14%. Plug Power Inc (NASDAQ:PLUG) is down 0.5% today at $1.94. 

Call buying has also been popular on CSIQ lately. The stock's 10-day call/put volume ratio at the ISE, CBOE, and PHLX stands at 2.48, which is higher than 72% of readings from the past year. Plus, CSIQ's Schaeffer's call/put volume ratio (SOIR) of 0.43 is just 2 percentage points from an annual low. So not only does call open interest more than double put open interest among options that expire within three months, but this indicator is also more call-skewed than almost all others from the past 12 months. 

During the past 10 sessions, the March 25 call has added the most open interest by far. Far from being bullish bets, data across the major exchanges confirms that traders have mostly sold to open positions here, meaning they're betting on the $25 level acting as a short-term ceiling through front-month option expiration. 

Like PLUG, CSIQ has struggled in post-earnings sessions, closing six of the last eight lower -- though, this time around, early signs are encouraging. Ahead of Thursday's earnings report, the options market is pricing in a 13.7% one-day swing in either direction. At last check, Canadian Solar Inc. (NASDAQ:CSIQ) was up 0.8% at $21.54. 

 

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