Investment Firm Says This Energy Stock is Undervalued

CSIQ options traders have been extremely call-heavy in recent weeks

Managing Editor
Aug 29, 2018 at 9:40 AM
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Canadian Solar Inc. (NASDAQ:CSIQ) is up 6.3% at $14.58 after Lion Point Capital said the alternative energy name was undervalued and disclosed a 6% stake. The investment firm also noted its plans to work with Canadian Solar's management team to enhance shareholder value.

CSIQ has been struggling on the charts since plunging to an annual low of $11.37 in mid-June on concerns of Chinese energy policy changes. The stock's recent breakout attempts have been quickly capped by the falling 100-day moving average, pushing the solar concern into an 18.6% year-to-date deficit.

Despite CSIQ's technical underperformance, options traders have been extremely call-heavy in recent weeks. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows Canadian Solar stock with a brow-raising 10-day call/put volume ratio of 127.56, ranking in the 99th annual percentile. This extreme rating shows calls have been purchased over puts at a much faster-than-usual clip.

Those wanting to speculate on the equity may want to consider doing so with options. The security's Schaeffer's Volatility Index (SVI) of 35% ranks in the 17th annual percentile, meaning short-term options are pricing in lower-than-usual volatility expectations at the moment -- a boon to potential premium buyers.

Lastly, short interest on the shares rose 3.1% during the most recent reporting period, and now represents a healthy 7.6% of the stock's total available float. At the energy stock's average daily trading volume, it would take exactly four days for shorts to cover their bearish bets.

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