Option Bulls Circle Solar Stocks After Paris Climate Deal

First Solar, Inc. (FSLR), SunPower Corporation (SPWR), and Solaredge Technologies Inc (SEDG) are moving higher -- and attracting call traders -- after climate talks in Paris

by Andrea Kramer

Published on Dec 14, 2015 at 2:56 PM

While oil-related stocks extend their recent swoon, alternative energy names are powering higher on an international agreement to stifle global warming, inked in Paris over the weekend. Among the solar stocks gaining ground -- and garnering attention in the options pits -- are First Solar, Inc. (NASDAQ:FSLR), SunPower Corporation (NASDAQ:SPWR), and Solaredge Technologies Inc (NASDAQ:SEDG).

FSLR is up 5.7% at $58.40, paring last week's guidance-related losses and bringing its year-to-date lead to 30.3%. Intraday call volume is running at 1.8 times the normal pace, and has more than tripled put volume so far. It looks like some traders are buying to open the December 60 call, amid hopes for FSLR to muscle atop the round-number strike by the end of the week, when front-month options expire.

Now is a great time to scoop up First Solar, Inc.'s (NASDAQ:FSLR) short-term options, too. The stock's Schaeffer's Volatility Scorecard (SVS) sits at a lofty 99, indicating the equity has tended to make outsized moves during the past year, relative to what the options market has priced in.

SPWR has rallied 9.6% to flirt with $23.59, after last week swooning in step with FSLR. The stock's call options are flying off the shelves at eight times the average intraday rate, and have outpaced puts by a margin of nearly 7-to-1. Apparent buy-to-open action has been spotted at the December 23, 23.50, and 24 strikes, suggesting traders are expecting SPWR to extend today's momentum through the end of the week.

In fact, call volume is on pace to hit an annual high; more than 14,000 contracts have changed hands, compared to the peak of 15,339 in late February. Meanwhile, SPWR's 30-day at-the-money implied volatility (IV) has jumped to 75.7% -- higher than 99% of all other readings from the past year.

Today's affinity for SunPower Corporation (NASDAQ:SPWR) calls marks a change of pace for the security. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day put/call volume ratio of 1.37 registers in the 77th percentile of its annual range. In other words, option buyers have initiated bearish bets over bullish at a faster-than-usual pace during the past two weeks.

Finally, SEDG is up 3.4% at $20.58, and on pace to topple its 50-day moving average for the first time since mid-September. Along with electric vehicle maker Tesla Motors, Inc. (NASDAQ:TSLA), Goldman Sachs called out SEDG as a top pick to benefit from the Paris climate talks.

Intraday call volume is running at twice the average pace, with more than 1,000 contracts traded. For comparison, fewer than 70 SEDG puts have crossed the tape. The resulting put/call volume ratio of 0.06 stands higher than just 14% of all other readings from the past 12 months.

Most popular is the December 15 call, where IV has skyrocketed 92%. If traders are buying to open the call at a volume-weighted average price (VWAP) of $5.90, their profit will increase the higher SEDG rallies north of $20.90 (strike plus VWAP) through Friday's close.

While Solaredge Technologies Inc (NASDAQ:SEDG) has been on the mend since its mid-November record low of $15.02, it's struggling to break north of the $21-$22 area, where the shares spent their first day of trading in March. In addition, this region acted as support for SEDG earlier this year, but could switch roles to serve as a speed bump.

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