Wednesday, May 19, 2010

Bullish? "Trina Solar Limited Targeted by In-The-Money Put Selling" (TSL)

The stock looks to close up 26 cents at $16.72.
Selling in-the-moneys is one way to acquire stock a bit cheaper than market (or it doesn't go down and you just pocket the premium!)
From Schaeffer's Research:

Shares of this solar concern are perched on key technical support

Trina Solar Limited (TSL) announced this morning that it has entered into a strategic partnership with TUV Rheinland. According to a company press release, the arrangement will allow TSL to "introduce its newest certified product lines in the shortest time to its customers." The news has been far from inspiring, with TSL shares down roughly 4% at last check.

Looking to take advantage of the stock's decline, options traders have piled into TSL puts. So far, more than 25,000 of these bearishly oriented options have changed hands, outstripping the stock's daily average by a ratio of more than 13 to one. The most active strike has been the June 17 put, where about 5,290 contracts have crossed the tape on open interest of only 391 contracts.

Oddly enough, most of the June 17 puts appear to have been sold to open. Specifically, two blocks of 2,550 contracts traded on the Philadelphia Stock Exchange at 10:14 a.m. for the bid price of $2.70, or $270 per contract. Even more interesting is that TSL is trading about two points below this strike, placing these puts in the money. Now, in-the-money put selling is not all that unusual, but if the trader were truly bullish on the stock, buying a June 17 call would be much more profitable.

Outside of today's activity, options traders are rather complacent toward TSL, as the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.87 ranks near the mid-point of its annual range. Furthermore, TSL's 10-day International Securities Exchange (ISE) and Chicago Board Options Exchange (CBOE) call/put volume ratio of 1.52 indicates that calls have been bought to open at a faster rate than puts during the past two weeks, but this ratio ranks in the 42nd percentile of all those taken in the past year.

Traders looking for sentiment indicators with a little more clout should take a closer look at TSL's short interest data and analyst ratings. Starting with short sellers, the number of TSL shares sold short may have declined by 10% during the past month, but nearly 7% of the stock's total float remains shorted. While the stock's recent price action hasn't been anything to call home about, a rebound from a key technical level (which we'll discuss later) may provide enough of a spark to spur these bears into taking some profits off the table....MORE