Options Check-Up: Freeport-McMoran Inc, JA Solar, SunPower Corporation

Analyzing recent option activity on FCX, JASO, and SPWR


Published on Dec 11, 2014 at 7:51 AM
Updated on Apr 20, 2015 at 5:32 PM

Among the stocks attracting attention from options traders lately are mining magnate Freeport-McMoran Inc (NYSE:FCX), as well as alternative energy concerns JA Solar Holdings Co., Ltd. (ADR) (NASDAQ:JASO) and SunPower Corporation (NASDAQ:SPWR). Below, we'll break down how option buyers are positioning themselves, and how much speculators are willing to pay for their bets on FCX, JASO, and SPWR.

  • FCX has been in freefall since its July highs, touching an annual low of $23.95 during yesterday's session, before closing at $23.96, a drop of 4.7%. Hurting the shares was news that FCX agreed to pay additional processing charges to a number of Chinese copper smelters, starting next year. Speculators are hopeful of a turnaround, though, as the equity's 50-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 2.65 lands in the 85th percentile of its annual range. Simply put, long calls have rarely been bought to open (relative to puts) at a faster pace in the past year. From a volatility perspective, traders are paying a steep price for Freeport-McMoran Inc's near-term options, per its Schaeffer's Volatility Index (SVI) of 39%, which ranks higher than all similar readings taken in the last 12 months.

  • JASO followed the broader market lower yesterday, losing 1.5% to close at $8.75. It's been a lackluster year for the stock, as it's down 4.6%. During the past two weeks, options traders have been betting on the downward trend to continue. At the ISE, CBOE, and PHLX, JA Solar Holdings Co., Ltd.'s (ADR) 10-day put/call volume ratio of 0.20 ranks in its bearishly skewed 73rd annual percentile. The security's short-term options are relatively inexpensive, on a volatility basis, according to its SVI of 62%. Specifically, the number arrives in the 32nd percentile of all similar readings taken in the last 12 months.

  • Finally, SPWR closed 2.8% lower yesterday to finish at $23.77. The equity is now down over 20% year-to-date. Despite the stock's technical struggles, recent activity in SunPower Corporation's options pits has been of the bullish variety. The stock's 10-day ISE/CBOE/PHLX call/put volume ratio of 4.05 is higher than 78% of similar readings taken in the past year. However, considering roughly 20% of the security's float is sold short, some of these bullish positions may have been initiated by short sellers as an upside hedge. Regardless of the motive, SPWR's near-term options are fairly priced, from a volatility perspective, as its SVI of 51% ranks in the 34th percentile of its annual range.

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