The extended market sell off is prevalent in the options trading arena this morning with investors buying puts as they see equities continue their move lower.
First up is SunPower Corp. (NASDAQ: SPWRA), a solar favorite that jumped in early May but has since held steady in the $21 range.
More than 4,500 SPWRA July 17 Puts were bought this morning for premiums ranging from $0.80 to $0.95, according to optionMONSTER’s Depth Charge system. The volume was four times the open interest of 1,100 contracts, so these are new positions.
SPWRA is down 1.08% to $21.07 this morning. The stock gapped higher from the $16 level to more than $22 when French energy giant Total announced in April that it was offering $1.37 for a majority stake in the maker of solar panels.
But Needham Research lowered its rating on the company to “underperform” on Wednesday, citing lower-than-expected revenue estimates and risks to the company’s 2011 earnings. The firm said it expects SPWRA to pull back further after the Total tender offer is completed on Tuesday next week.
For the puts bought today to turn a profit, the stock would need to fall 23% to 24% by expiration in mid-July, depending on the premium that was paid. Overall SPWRA puts at all strikes outnumber calls by more than 4 to 1.
It is the second solar company to see downside option activity in the last week, following put buying in LDK Solar (NYSE: LDK) last Friday.
Find more option analysis and trading ideas at Options Trading Strategies.
NovaGold Resources (AMEX: NG) has been skidding lower all year, and one investor is positioning for more downside.
Our tracking system detected a surge of put activity in the Canadian gold miner, with four blocks of 24,000 contracts each changing hands. The September 9s were bought for $0.70 and the September 11s were sold for $1.80. Seconds later, the December 9s were bought for $1.10 and the December 7s were sold for $0.35.
The transaction resulted in a credit of $0.75. Volume was below open interest in September, but not December. That suggests that an existing position was rolled forward by three months.
The strategy in question was a bearish put spread. Adjusting the trade today let the investor take profits on NG’s recent drop, and will make an additional $2 if the shares fall to $7 by expiration.
NG is down 0.91% to $9.79 this morning and has lost 33% of its value this year.
Overall option volume in the stock is 20 times greater than average so far today, with puts outnumbering calls by more than 140 to 1.
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