Option Bears Barrage Sinking SunPower Corporation (SPWR)

Congress is investigating the tax incentives received by SunPower Corporation (SPWR) and other solar companies

by Alex Eppstein

Published on Sep 16, 2016 at 11:25 AM
Updated on Jun 24, 2020 at 10:16 AM

It's another gloomy day for solar stock SunPower Corporation (NASDAQ:SPWR). The shares have shed 2.6% at $7.52, after The Wall Street Journal reported Congress has launched a probe into the industry's tax incentives arrangement (subscription required). And, from the looks of it, some options traders are counting on an even steeper decline in the months ahead.

Diving right in, SPWR put options are changing hands at triple the usual intraday rate. Most active is the January 2017 7-strike put, where all signs point to buy-to-open activity. In other words, traders believe the solar stock will breach $7 -- and notch new three-year lows -- by January expiration.

Longer term, though, call traders have prevailed at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Specifically, SPWR's 50-day call/put volume ratio of 2.96 indicates nearly three calls have been bought to open for every put in the past 10 weeks. What's more, this ratio registers just 12 percentage points from an annual peak.

Underscoring this call-skew, SPWR's Schaeffer's put/call open interest ratio (SOIR) is 0.43. Not only does this ratio indicate near-term calls more than double puts, it also ranks in the low 12th percentile of its 52-week range.

Having said that, it's worth mentioning that call buyers aren't necessarily bullish. With 15.5 million shares sold short, SPWR's short-interest ratio is a top-heavy 6.20. In other words, it's possible shorts have been hedging their positions through the purchase of protective calls.

From a technical perspective, SunPower Corporation (NASDAQ:SPWR) has been a dud. The solar stock yesterday touched a three-year low of $7.37, and year-to-date, it's surrendered three-quarters of its value.

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