Short-Term Traders Eye Red-Hot Sunedison Inc, SolarCity Corp

Sunedison Inc (SUNE) and SolarCity Corp (SCTY) are leading solar stocks higher

Apr 5, 2016 at 2:03 PM
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It's a big day for solar stocks, which are being led higher by Sunedison Inc (NYSE:SUNE) -- up over 76% at $0.37 amid unconfirmed buyout rumors. Joining in the party is SolarCity Corp (NASDAQ:SCTY), which has bolted to a 5% gain at $26.25, as traders speculate about the installation of SCTY solar panels on Tesla Motors Inc's (NASDAQ:TSLA) top-secret Model Y. Below, we'll take a closer look at the technicals and options trading activity on both solar stocks.

As mentioned earlier, SUNE is killing it today, and is on track for its biggest single-day percentage gain in over 14 years. Also of note, the stock's intraday volume is on track for an annual high.

Nevertheless, options trading on SUNE has been rather tepid today, running at approximately half the usual intraday clip. The two most active options are the weekly 4/8 and April 0.50 calls, which traders may be buying to open -- and paying a pretty penny for them, too. If so, these speculators think SUNE will topple $0.50 by the respective expiration dates, at the close this Friday and next.

Taking a step back, however, the stock has seen an unusually pronounced preference for bearish bets over bullish at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). SUNE's 10-day put/call volume ratio of 0.96 across those exchanges ranks just 15 percentage points from an annual peak. Likewise, its Schaeffer's put/call open interest ratio (SOIR) checks in at 1.05, higher than all but 4% of readings from the prior 12 months.

While Sunedison Inc is blasting off today -- potentially fueled by short-covering activity -- it remains a long-term laughingstock. Since touching a six-year high of $33.45 in July, the shares have lost almost 99%, and just yesterday hit a record low of $0.20.

Meanwhile, SCTY's huge gains are being met with accelerated call option trading, currently at 1.2 times the intraday norm. Based on ISE data, at least some buy-to-open activity is transpiring at the stock's weekly 4/8 25- and 29-strike calls, suggesting traders are rolling the dice on upside through week's end, when the options expire.

SCTY is no stranger to call buying. The stock's 20-day ISE/CBOE/PHLX call/put volume ratio registers at 1.84, with long calls nearly doubling puts. However, it's possible short sellers are behind some of these seemingly bullish bets, as two-fifths of the stock's float is sold short.

On the charts, though, SolarCity Corp has been a trainwreck -- today notwithstanding. In 2016 alone, the solar stock has surrendered nearly half its value. Plus, today's gains are finding it difficult to overcome resistance at SCTY's descending 60-day moving average, which rejected a rally in late January.

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