Solar glows as money moves in Nasdaq
06/23/17

Tech or no tech, traders are finding places for their money in the Nasdaq.

Consternation swept Wall Street after high-flying megacaps like Apple (NASDAQ: AAPL), Facebook (NASDAQ: FB), Amazon.com (NASDAQ: AMZN), and Microsoft (NSADAQ: MSFT) took a collective drubbing on June 9. Traders weren’t sure what caused the drop, and it’s kept the Nasdaq mired in a range ever since.

But there have been signs of money shifting from those major names into smaller, lagging areas. On Wednesday, that meant biotechnology. On Thursday, it meant solar energy.

Canadian Solar (NASDAQ: CSIQ) led the charge as options volume surged to more than 30 times the monthly average. (Upside calls overran downside puts by a bullish 10-to-1 ratio.) Two contracts in particular stood out yesterday:

  • Traders amassed 10,000 October 18 calls for $0.70 less than an hour after the opening bell, with CSIQ shares challenging its highest levels in almost four months.
  • They came back for another serving only minutes later, this time gobbling up 12,000 January 20s for $0.75.

Calls fix the price where a security can be purchased. They can generate significant leverage if a stock rallies but also go worthless if it doesn’t move sufficiently. Those 18s, for instance, will break even if CSIQ rises 20 percent to $18.70 by expiration. They’ll double from a 25 percent move to $19.40, and triple if the shares advance 30 percent to $20.10. Under $18, and they're worthless.

Traders also crammed dough into First Solar (NASDAQ: FSLR). This time, they bought almost 4,000 30-June 38.50 calls for $0.70 to $1.20. SunPower (NASDAQ: SPWR) got some love, too, as 2,300 of its 23-June 9 calls changed hands for $0.03 to $0.11.

Canadian Solar (CSIQ), YTD chart

Source: OptionsHouse by E*TRADE

SPWR shot up 13 percent to $8.69, CSIQ rallied 7.72 percent to $15.07, and FSLR climbed 3.20 percent to $38.42. 

There didn’t seem to be any headlines to explain the move, but some market veterans silently mouthed two words over and over again: “Short squeeze,” “short squeeze,” “short squeeze.” That’s when traders sell shares they don’t own in hope of a drop – only to be forced to buy them back (or “cover”) to avoid losing money to the upside. 

After all, bearish positions dominated the space and accounted for more than one-third of SPWR’s float. In FSLR, it consumed a quarter. In CSIQ, ursine vibes (Read: Bears) stood at 16 percent.1 Looks like the glass-half-empty crowd got caught off guard... 

Elsewhere in the Nasdaq, bulls lingered in biotech. They bought almost more than 4,000 23-June 70 calls in Gilead (NASDAQ: GILD), paying a range of premiums from $0.25 to $1.45. GILD, which has been in a steady downtrend for the last two years, jumped 4.41 percent to $70.48 – its biggest one-day move since November. 

About 4,000 September 7.50 calls were also bought in small-cap drug developer Abeona Therapeutics (NASDAQ: ABEO) for $0.50. ABEO rose 12 percent to $5.60.

Bottom line: Solar stocks and biotechs have been coming to life this week as money shuffles within the Nasdaq.

 

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1. Yahoo Finance: Key Statistics. 6/22/17.