Options Trading News

December 31, 2012  Mon 3:16 AM CT

Traders are looking for daylight in LDK Solar as it emerges from a multi-month slide.  

More than 2,000 January 1 calls traded in a strong buying pattern for an average price of $0.39 on Friday, according to optionMONSTER's Heat Seeker tracking system. The volume was above the previous open interest of 1,647, indicating new activity.

LDK rose 10.66 percent on Friday, or $0.13, to end the week at $1.35. The Chinese solar-panel maker hit a 52-week high near $7 in February but then began a steady decline that took it all the way to $0.71 in mid-October.

Shares have nearly doubled in price since then, rising above their 50- and 100-day moving averages along the way, as the beaten-down sector attempts a comeback. Solar-energy companies have risen more than 28 percent on average in the last month, making them the best-performing group on researchLAB in that time.

The long calls, which lock in the price where traders can buy stock, will track the share price closely because they are already in the money. They are looking for LDK to gain roughly 3 percent or more in less than three weeks but will expire worthless if the stock doesn't move.

The trades pushed total option volume in the name to 3,567 contracts on Friday, more than 5 times its daily average in the last month. Calls outnumbered puts by 6 to 1.
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As I stated in last week's article, a break out or a break down needs to have a couple things happen before it is considered a confirmed break out or break down. The only problem is that in today's market where things move much more quicker than they did just a few years ago, two days could wind up being the majority of the expected movement, if not the whole movement.

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