Inside The Six-Figure Bearish Bet On Sunedison Inc (SUNE)

Sunedison Inc (NYSE:SUNE) is soaring today, but options traders are still targeting puts

Mar 8, 2016 at 11:52 AM
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Sunedison Inc (NYSE:SUNE) option volume is running at an accelerated rate today, after Vivint Solar Inc (NYSE:VSLR) terminated the companies' $2.2 billion merger agreement. Put volume is currently four times what's normally seen at this point in the day, arriving in the 96th percentile of its annual range.

The March 1.50 put is the most popular option, thanks to a 7,688-contract block that crossed this morning. The trader bought to open the contracts for $0.16 each, meaning she's betting roughly $123,000 (premium paid * 100 shares per contract * number of contracts) on SUNE to drop below $1.50 before the front-month options expire on Friday, March 18. 

On one hand, it's somewhat surprising to see such intense interest in SUNE puts. That's because call buying has outpaced put buying at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) over the past two weeks. However, on a relative basis, put buying has been gaining steam. SUNE's 10-day put/call volume ratio across these exchanges has jumped from 0.14 to 0.77 over the past 10 sessions. This current reading lands in the 85th percentile of its annual range. 

Another indicator revealing this focus on puts is the stock's Schaeffer's put/call open interest ratio (SOIR). At 0.80, this reading tops all but 2% of comparable marks from the past year, showing a much stronger-than-usual preference for puts over calls among short-term speculators. 

On the analyst front, J.P. Morgan Securities downgraded SUNE to "underweight" this morning. It'll be interesting to see if other brokerage firms weigh in on the stock following this news, as 57% of those that cover SUNE currently sit on the fence with "hold" ratings. 

At last check, Sunedison Inc (NYSE:SUNE) was 19% higher at $2.27 -- marking yet another upward surge this month. Still, the shares have been horrible on a longer-term basis, dropping over half their value in 2016

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