Options Radar: SunEdison, Potash Corp./Saskatchewan, and Alibaba Group

Reviewing notable options activity on SunEdison Inc, Potash Corp./Saskatchewan (USA), and Alibaba Group Holding Ltd

by Andrea Kramer

Published on Nov 18, 2014 at 11:21 AM
Updated on Apr 20, 2015 at 5:32 PM

Option traders have taken a shine to silicon wafer maker SunEdison Inc (NYSE:SUNE), fertilizer firm Potash Corp./Saskatchewan (USA) (NYSE:POT), and Chinese e-commerce concern Alibaba Group Holding Ltd (NYSE:BABA). Here's a look at how speculators have been placing their bets on SUNE, POT, and BABA.

  • SunEdison Inc (NYSE:SUNE) is 23.8% higher at $20.57, thanks to news that the company is dipping its toes into the world of wind power. Specifically, the firm and TerraForm Power Inc (NASDAQ:TERP) -- its publicly traded subsidiary -- said they're buying Boston-based First Wind for up to $2.4 billion. As a result, option traders are blitzing SUNE, especially on the call side of the aisle. Intraday call volume is running at 16 times the average pace, and the stock's 30-day at-the-money (ATM) implied volatility (IV) has rocketed 12.7% to 65.6%, reflecting a growing demand for short-term contracts. Digging deeper, it looks like bulls may be buying to open the December 19 call, amid hopes for SUNE to extend its rally north of $19 through the close on Friday, Dec. 19, when the soon-to-be front-month options expire. The preference for calls over puts marks a shift in sentiment among buyers, as SUNE's 10-day put/call volume ratio on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) sits at 1.59 -- just 7 percentage points from an annual bearish acme.

  • Potash Corp./Saskatchewan (USA) (NYSE:POT) is up 4.9% at $35.44, after Russian potash miner Uralkali OAO suspended work and evacuated personnel from a mine upon detecting elevated levels of brine inflow. Against this backdrop, several agricultural names are in the black, and POT is especially popular among option bulls. Intraday call volume is running at 21 times the typical rate, and has outpaced put volume by a margin of roughly 7-to-1. The equity's 30-day ATM IV has popped 4.2% to 19.9%, as traders take a shine to short-term options. Specifically, potential buy-to-open activity has been detected at the weekly 12/12 35-strike call, as well as the December 34 and 36 calls. The affinity for bullish bets is relatively rare for POT, as the equity's 10-day ISE/CBOE/PHLX put/call volume ratio of 1.20 stands higher than 85% of all other readings from the past year.

  • Finally, Alibaba Group Holding Ltd (NYSE:BABA) is bucking the broad-market trend higher, down 3.1% at $110.71. Since touching a record high of $120 last Thursday, the shares of BABA have backpedaled 7.7%, and are in danger of ending south of their 10-day moving average for the first time since Oct. 15. Nevertheless, calls have more than doubled puts today, and are trading at nearly twice the usual intraday clip. The stock's 30-day ATM IV has edged 1.9% higher to 40.7%, with short-term traders buying to open the November 113 call, amid hopes for BABA to climb back atop $113 by Friday's close, when front-month options expire.

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