Wednesday, October 6, 2010

Solarfun (SOLF) - Spec Call Buying Pushes Skew

SOLF is trading $12.07, up 4.1% with IV30™ up 12.7%. The LIVEVOL™ Pro Summary is below.

For a limited time we are offering a FREE real-time trial to Livevol Pro™. Yup, that's right, we will pay your exchange fees and allow access to the front end powering Market Makers on every exchange floor in the United States. Click for Free Trial Offer.

On 9-30-2010, Jefferies Analyst Jesse Pichel raised his forecasts on the entire group - well above the consensus. That article is available by clicking here.

The company has traded over 17,000 options on total daily average option volume of just 2,365. All but 1,540 contracts have been calls. The action has been in the Oct 12 and 13 calls where over 14,000 contracts have traded. The Stats Tab and Day's biggest trades snapshots are included (below).

The Options Tab (below) illustrates that the calls are mostly opening (compare OI to trade size). Oct vol is up 20 points or 33% from the order flow. Nov is up ~10% or 6 vol points. We can also see that 11,000 Oct 13 calls have traded. My guess is it's to the buy side.

The Skew Tab snap (click to enlarge) illustrates the vols by strike by month.

It's not unusual for solar companies to have a reverse skew, but the vols in Oct are whack. It's a straight line up with positive slope. To read why skew exists and what normal skew looks like you can go here:Understanding Option Skew.

Finally, the Charts Tab (6 months) is below (click to enlarge). The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink). The yellow shaded area at the very bottom is the IV30™ vs. the HV20™ vol difference.

A couple things to note:
1. The Vol pop today, though it's significant, is still slightly below the long term realized HV180™ which is 74.

2. The stock has been stuck in a rut for the last month as evidenced by the HV20™ which is just 45, or 40% lower than the IV30™.

The Oct skew looks ridonculous (yes, it's a word... sort of...). For those that are inclined to get long this name through long options, a Nov 13 / Oct 14 call spread does purchase 69 vol and sell 84. For any call selling, try the offer (or near the offer) as the liquidity may provide for good selling prices. A bunch of other trades/spreads are on the board, depending on how (and if) you want to play the risky solar sector.

This is trade analysis, not a recommendation.

Legal Stuff:

No comments:

Post a Comment