Bulls Target Canadian Solar Inc. and First Solar, Inc. as Solar Stocks Surge

Canadian Solar Inc. (CSIQ) and First Solar, Inc. (FSLR) calls are hot amid a solar-sector rally

Jun 5, 2015 at 2:09 PM
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Solar stocks are on fire this afternoon. While JA Solar Holdings Co., Ltd. (ADR) (NASDAQ:JASO) is rallying in the wake of a bid to go private, and sector peer Yingli Green Energy Hold. Co. Ltd. (ADR) (NYSE:YGE) is higher on predictions of profitability, Canadian Solar Inc. (NASDAQ:CSIQ) is in the black -- and garnering options attention -- after commenting on regulatory drama overseas. Not to be outdone, First Solar, Inc. (NASDAQ:FSLR) is flying high with its sector peers, and short-term option bulls are circling. 

CSIQ is up 3.8% at $32.71, bringing its 2015 gain to a respectable 35.2%. In the options pits, it looks like speculators are buying to open the June 35.50 call -- most active thus far -- to roll the dice on a move north of the strike by the close on Friday, June 19, when front-month options expire. 

Overall, Canadian Solar Inc. (NASDAQ:CSIQ) calls have more than doubled puts today, representing a major change of pace. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day put/call volume ratio of 1.80 stands higher than 96% of all other readings from the past year, pointing to a healthier-than-usual appetite for bearish bets of late. 

FSLR is flirting with a 3% lead at $51.14, continuing its positive June trend. Intraday call volume is running at three times the norm, and has outpaced put volume by a margin of roughly 4-to-1. Along with a few eleventh-hour bulls buying to open calls that expire at the close, it seems traders are initiating long positions at the weekly 6/12 50.50-strike call. 

By purchasing the calls to open at a volume-weighted average price (VWAP) of $0.94, the buyers' profit will increase the higher FSLR flies north of $51.44 (strike plus VWAP) within the next week, which represents the contracts' lifetime. Risk, meanwhile, is capped at the initial premium paid, should the security backpedal beneath the strike.

Again, today's appetite for bullish bets is relatively rare for First Solar, Inc.'s (NASDAQ:FSLR) short-term traders. The equity's Schaeffer's put/call open interest ratio (SOIR) of 0.98 registers in the 93rd percentile of its annual range, implying that near-term speculators have rarely been more put-biased during the past year. As FSLR extends its ascent, a mass exodus of option bears could add fuel to the security's fire.

 

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