Wednesday, January 11, 2012

ReneSola (SOL) - Stock and Vol Explode on Chinese Solar Down 90%

SOL is trading $2.21, up 28.5% with IV30™ up 49.0%. The LIVEVOL® Pro Summary is below.


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ReneSola Ltd. (ReneSola) is a manufacturer of solar wafers and producer of solar power products based in China. The Company possess a global network of suppliers and customers that include some of the global manufacturers of solar cells and modules.

I last wrote about SOL on 11-17-2010. The stock was trading $9.25 and I noted the elevated vol. Yesterday's close was $1.72, so in fourteen months the stock is down 81.4%. Even to today's pop, SOL is down 75.7% since the last post. So, ya know... the elevated risk reflected in the option market was justified... You can read that prior post here:
ReneSola (SOL) - Elevated Vol in Chinese Solar Company

Today's note surrounds the stock and vol pop as well as some order flow.  As far as I can tell, the news driving the stock and vol move is a note out from Deutsche Bank citing positive remarks in the solar sector. I found that one-line teaser from

The company has traded over 14,000 contracts on total daily average option volume of just 978. All but 429 contracts have been calls, yielding a 32:1 call:put ratio. The action has been in the Feb 2 calls where over 8,200 have traded -- substantially purchases, IMO. 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). When looking down the entire option chain, I don't see any OI larger than 5,100, so this action is very large for SOL.

The Skew Tab snap (below) illustrates the vols by strike by month.

We can see the ATM vols for the front three months are monotonically increasing to the shorter expiry. More interesting to me is the upside skew in Feb vs Apr. Essentially the Feb calls show a rising vol from the ATM while Apr shows a dropping vol. The vol diff between the Feb and Apr 3 strike calls is nearly 25 vol points.

Looking back to the Options tab (above), we can see over 1,100 Feb 3 calls have traded on zero OI. Those look long to me, but it's a touch ambiguous on some trades. Given the circumstantial evidence (skew rising), it feels like long interest.

Finally, the Charts Tab (two years) is below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20 - blue vs HV180 - pink).

On the stock side, we can see the highs a little more than a year ago when this stock was a teenager and then the rather cataclysmic 90% drop. On the vol side, we can see the IV30™ peak on 10-20-2011 to 164.91%, then abrupt drop. Today's move has pushed the implied back over 124% (as I'm writing this the vol is rising).

This is trade analysis, not a recommendation.

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