Option Bears Eye Record Lows Ahead for Sunedison Inc (SUNE)

Option traders are betting on Sunedison Inc (NYSE:SUNE) to fall to new record lows after earnings

by Kirra Fedyszyn

Published on Mar 28, 2016 at 2:41 PM

After missing an already-extended deadline to file its yearly financial report, solar energy interest Sunedison Inc (NYSE:SUNE) is tentatively expected to release its earnings this Wednesday, March 30. But a look to the option pits make it clear that traders are expecting the news to be grim, if SUNE manages to file this time.

Specifically, bearish speculators today have been targeting SUNE's weekly 4/1 0.50-strike put, where more than 5,700 contracts have changed hands -- and data from the International Securities Exchange (ISE) confirms that at least a portion of these put options were bought to open. That means these traders are expecting the stock to plunge below $0.50 -- deep into record-low territory -- before the weekly option expires this Friday.

With traders expecting SUNE to report financial results soon, near-term option buyers could be paying huge premiums for their bets. SUNE's Schaeffer's Volatility Index (SVI) of 385% arrives in the 100th percentile of its annual range. Likewise, the stock's 30-day at-the-money implied volatility sits in the 99th percentile of its annual range, at 363%. In other words, the options market is pricing in major short-term volatility expectations for SUNE shares.

Sentiment among SUNE option traders has been distinctly bearish in recent months as the shares have continued their slide. At the ISE, Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day put/call volume ratio of 1.21 is higher than 96% of all readings in the last year. Echoing this is SUNE's Schaeffer's put/call open interest ratio (SOIR) of 1.20 -- an annual put-skewed high.

Outside of the option pits, sentiment isn't any brighter. More than 46% of SUNE's available float is currently wrapped up in short interest. And analysts have taken a dim view of the equity, with nine out of 13 handing out "hold" or "sell" ratings.

But all of this pessimism is hardly shocking. The stock has given up 96% of its value since last July's multi-year high of $33.45, and the shares hit a fresh 14-year low of $1.15 last Thursday. Today Sunedison Inc (NYSE:SUNE) is bouncing, up 12.4% at $1.36, but its positive momentum has fizzled near emerging resistance around the $1.50 level.

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