The Culprit Behind the Solar Sector Selloff

SEDG put traders are having a field day today

Managing Editor
Oct 20, 2023 at 11:47 AM
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SolarEdge Technologies Inc (NASDAQ:SEDGis giving the solar sector a bad rap today. The solar inverter company reported a sharp third-quarter revenue miss, and warned that due to dried up demand in Europe, fourth-quarter revenue would be "significantly lower." No fewer than six price-target cuts ensued, the worst coming from TD Cowen to $176 from $294. 

The report sent shockwaves through the solar sector, with heavyweights Sunrun (RUN), Sunnova (NOVA), and Enphase Energy (ENPH) all off by 9% or more, with the latter nursing a 14.5% drawdown. The solar exchange-traded fund (ETF) Invesco Solar ETF (TAN) is off by 6.8% and trading at three-year lows. 

SolarEdge stock also fell to a more than three-year low of $72.37, and now sits off by 29% to trade at $80.52, currently on the short-sell restricted (SSR) list. SEDG nurses a 71% deficit for 2023 and more downgrades could weigh on the equity, considering 16 of the 21 brokerages in coverage rate the solar company a "buy" or better, with zero "holds" on the books. 

It's no surprise puts are popping today. Over 26,000 puts have changed hands already, volume that's 11 times the average intraday amount and pacing for the 100th percentile of its annual range. The November 70 put is an interesting contract to watch. 

Options traders have been overwhelmingly bearish in the last two weeks. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day put/call volume ratio of 1.24 stands higher than 77% of readings from the last 12 months.

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