Put Traders Pounce on Sinking Solar Stock

The Federal Reserve's interest rate decisions are heavily impacting the solar sector

Deputy Editor
Dec 20, 2023 at 12:55 PM
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While the prospect of lower interest rates has reignited excitement surrounding solar stocks, the Federal Reserve's decision to leave rates untouched to close out the year did little to lift such equities. Array Technologies Inc (NASDAQ:ARRY), for example, is trading 6.5% lower at $17.26 at last check, adding to its 23.1% quarter-to-date deficit.

It looks like caution surrounding the sector could be here to stay until the central bank follows through on its dovish commentary, but some options traders are taking advantage of the pullback.

Specifically, Array Technologies stock's normally quiet options pits have seen 2,831 puts traded so far today, or double the average intraday volume. Most popular today is the January 19, 2024 17.50 put, though new positions are being sold to open at the second most popular contract, the February 25 call. 

The increased interest in bearish bets denotes a shift in recent sentiment. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day call/put volume ratio of 50.87 stands higher than 92% of readings from the last 12 months. This means that more than 50 calls were bought for every put over the last two weeks.

A downgrade from Piper Sandler on Monday could be behind ARRY's increased bearish activity. The analyst downgraded shares to "neutral" from "overweight," and cut its price target to $22 -- still a roughly 21% premium to the equity's current perch.

Those looking to bet with options can do so for a bargain right now. The security's Schaeffer's Volatility Index (SVI) of 62% ranks in the 18th percentile of its annual range, meaning options traders are pricing in relatively low volatility expectations at the moment. 

Following its surge to a Sept. 15 two-year high of $26.64, Array Technologies stock has erased more than 30%. In early November, the security touched its lowest level since July 2022, and though it quickly bounced back from this floor, its 150-day moving average capped the rally just above the $20 mark.

Now in a deficit for the third time in four sessions, ARRY is back below its year-to-date breakeven mark, off 10.5% in 2023. However, it's worth noting that despite this deficit, its still outperforming the iShares Global Clean Energy ETF (ICLN), which now sports a 23.2% year-to-date deficit. 

ARRY Chart December 202023

 

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