Option Bulls Bombard Booming Canadian Solar Inc. (CSIQ)

Canadian Solar Inc. (CSIQ) call options are in high demand, as the solar stock rides sector tailwinds higher

Aug 1, 2016 at 2:01 PM
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Solar stocks are getting a boost today, after Trina Solar Limited (ADR) (NYSE:TSL) accepted a $1.1 billion all-cash offer to go private. Canadian Solar Inc. (NASDAQ:CSIQ) is one of the big beneficiaries, with the stock 5.3% higher at $14.95, and its call options running at five times the usual intraday rate.

Most active is the August 15 call, where Trade-Alert indicates traders are buying new positions. In other words, these option bulls foresee CSIQ toppling $15 by the close on Friday, Aug. 19, when front-month options expire. Among even shorter-term options, buy-to-open activity is detected at the weekly 14.50- and 15-strike calls.

Call buying is far from unusual, based on data at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). In fact, traders have bought to open 8.98 CSIQ calls for every put during the past two weeks. This call/put volume ratio rests just 6 percentage points from an annual high.

At the same time, the brokerage crowd is extremely bullish toward CSIQ stock, with all seven covering analysts handing out "strong buy" endorsements. Plus, short sellers have been fleeing en masse, with short-interest dropping 11.7% during the most recent reporting period.

From a technical perspective, it's unclear whether all of this optimism is warranted. Even after accounting for today's monster gains, Canadian Solar Inc. (NASDAQ:CSIQ) has lost nearly half of its value on a year-to-date basis. Plus, even at their intraday peak, the shares were contained by the descending 40-day moving average.

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