Sunedison Inc (SUNE) Burns Bright on Tax Credit Hopes

Sunedison Inc (SUNE) is up 15%, bringing more call traders to the table

by Alex Eppstein

Published on Dec 15, 2015 at 2:40 PM
Updated on Jun 24, 2020 at 10:16 AM

Solar stocks are burning bright this afternoon, as traders bank on a current investment tax credit to be extended beyond 2016. Sunedison Inc (NYSE:SUNE) is certainly no exception to that rule, up 15% at $5.05 -- sending call volume to 1.3 times the typical intraday pace. In the lead by a mile is the at-the-money December 5 strike, where more than 19,000 contracts have changed hands.

Taking a step back, traders have been buying to open SUNE calls at a rapid-fire rate in recent weeks. The stock's 10-day call/put volume ratio of 12.47 across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) ranks in the 98th percentile of its annual range.

While this seems bullish at first blush, it's possible these calls are being purchased as insurance by short sellers. After all, short interest spiked 29.5% during the latest reporting period, and now makes up almost 44% of SUNE's total float.

Perhaps lending further credibility to this protective call theory is the stock's performance. Since touching a seven-year high of $33.45 in late July, SUNE has plunged 85%. What's more, the shares are facing a potential layer of overhead resistance at their 40-day moving average.

In other news, Sunedison Inc (NYSE:SUNE) today requested that its "yieldco," TerraForm Power Inc (NASDAQ:TERP), forfeit its right to purchase certain call right projects. Nonetheless, TERP is sharply higher with the solar sector, up 2.2% at $12.34.

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