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Earnings Preview: ReneSola, Trina Solar, and Vivint Solar

Analyzing recent option activity on ReneSola Ltd. (ADR) (SOL), Trina Solar Limited (ADR) (TSL), and Vivint Solar Inc (VSLR)

Mar 3, 2015 at 1:11 PM
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Among the stocks gearing up to report earnings tomorrow are solar energy concerns ReneSola Ltd. (ADR) (NYSE:SOL), Trina Solar Limited (ADR) (NYSE:TSL), and Vivint Solar Inc (NYSE:VSLR). Below, we'll break down how options traders are positioning themselves, and how much speculators are willing to pay for their bets on SOL, TSL, and VSLR.

  • SOL has been sliding, with the shares down about 64.6% year-over-year to hit $1.37. Accordingly, short-term puts are more prominent than usual in the options pits, as ReneSola Ltd.'s Schaeffer's put/call open interest ratio (SOIR) of 0.47 sits just 8 percentage points from an annual high. Said another way, options traders have rarely been this put-skewed over the past year, when measuring options that expire in three months or less. Traders hoping for additional downside after the company releases earnings tomorrow have history on their side: in the session immediately following its last eight earnings reports, SOL has lost an average of 5.7%, including a 7.1% dip this past November. Near-term options on the stock are available for inflated prices, as its Schaeffer's Volatility Index (SVI) of 175% sits in the 71st percentile of its annual range.

  • On the other hand, sector peer TSL has been edging higher, with the shares up over 19% year-to-date to reach $11.02, including a 0.6% gain today. However, sentiment in the stock's options pits is pessimistic ahead of tomorrow's earnings release. Specifically, Trina Solar Limited's 50-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 0.87 reads higher than 97% of all similar readings taken over the past year. What's more, short interest accounts for nearly 18% of TSL's available float, which would take nearly five sessions to cover, at average daily trading volumes. Meanwhile, in the session following its last four earnings reports, TSL has advanced an average of 7.2%, including a staggering 30.9% gain in May 2014. Option traders are paying historically cheap prices for their short-term bets on the equity, as its SVI of 59% sits in the 21st percentile of its annual range.

  • Since debuting with an IPO price of $16 in October, the shares of VSLR have fallen nearly 50% to rest at $8.12, including a 0.1% dip so far today. Accordingly, bearish activity is ramping up; short interest on Vivint Solar Inc has grown by nearly 33% over the past two reporting periods, and now accounts for over 17% of the stock's available float, representing four and a half days of pent-up buying power, at VSLR's average daily volume. In the session following its last two earnings reports, VSLR has shed an average of 11.9%, with the security failing to notch a positive post-earnings move since going public. Short-term options on VSLR are available for relatively inexpensive prices, as its SVI of 85% sits in the 32nd percentile of all similar readings taken over the past year.

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