Solar bulls play it safe with Renesola
David Russell | [email protected]
Our Heat Seeker monitoring system detected the purchase of more than 3,000 October 6 calls, dwarfing previous open interest of just 260 contracts. Most of the large blocks priced for $0.25 to $0.35 early in the session.
SOL was up about 14 percent at the time. It's since retreated but remains up 9.55 percent to $5.62 in afternoon trading. The stock has more than doubled since June as investors piled into solar names, which have been the best-performing group in the entire market over the last six months, as shown on the screen shot from our researchLAB maker scanner below.
These long calls lock in the price where shares can be purchased. Traders use them when they don't want to miss a rally but also wish to put only a small amount of capital on the line. That makes a lot of sense with concerns about the situation in Washington driving the S&P 500 lower today.
This way, they can profit if SOL continues to rally in the near term, while risking a tiny fraction of the share price. SunEdison traders, for instance, racked up some quick gains this week using the November contracts. (See our Education section)
Total option volume in SOL is 6 times greater than average so far today, according to the Heat Seeker. Calls outnumber puts by almost 9 to 1.
(Graphic courtesy of researchLAB)