Yingli Green Energy Holding Co Ltd (YGE) Earnings Explosion a Boon to Option Bulls

Yingli Green Energy Holding Co Ltd (ADR) (YGE) is tearing up the charts following the solar company's first quarterly profit in nearly five years

by Alex Eppstein

Published on Jun 14, 2016 at 10:16 AM

Yingli Green Energy Holding Co Ltd (ADR) (NYSE:YGE) has exploded out of the gate, up 6% to trade at $4.63. Sparking the surge is the solar energy firm's earnings report, which revealed its first quarterly profit in almost five years. This should come as welcome news for bullish options traders, who have seemingly been waiting for the stock to turn things around.

Heading into today's session, YGE stock was sitting on a 6.2% year-to-date deficit. And while the shares gapped higher earlier this month on the solar firm's preliminary first-quarter financial results, they quickly pulled back on negative analyst attention. However, today's explosive upside move has YGE flirting with its 200-day moving average, a trendline it hasn't toppled on a daily closing basis since March 2014.

Meanwhile, traders at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have recently caught the bullish bug. During the past 10 sessions, YGE has amassed a call/put volume ratio of 1.47 (though total options volume was relatively light). For comparison's sake, that ratio stood at 0.24 one week ago, with long puts outweighing calls.

Echoing this call-skew, YGE's Schaeffer's put/call open interest ratio (SOIR) checks in at 0.12. In other words, among options expiring in the next three months, calls outweigh puts by a more than 8-to-1 margin. If that's not enough, the current SOIR ranks in the low 7th percentile of its annual range.

That's not to say everyone's upbeat toward Yingli Green Energy Holding Co Ltd (ADR) (NYSE:YGE). For instance, short interest on the solar stock spiked 17.7% during the last two reporting periods, and it would take nearly nine sessions for short sellers to cover their bearish positions, at YGE's typical trading levels. With that in mind, it's possible some of the recent call purchases came at the hands of short sellers seeking an upside hedge.

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