On Monday evening, Clean Energy Fuels Corp
(NASDAQ:CLNE) CEO Andrew Littlefair promised via Twitter to make a major announcement on Thursday, helping the stock rise 6.4% yesterday. Option volume likewise soared in the wake of that tweet, particularly on the call side, where 13,000 contracts changed hands on Tuesday -- more than six times the norm, and about five times the number of puts exchanged. The most popular strike was CLNE's October 14 call.
Digging deeper, close to 3,000 contracts traded at that strike, with about two-thirds going off at the ask price, indicating they were purchased. Open interest at the position gained 2,265 contracts overnight, as well, suggesting a sizeable amount of buy-to-open activity. The volume-weighted average price (VWAP) for the trades was $0.26.
Thus, Clean Energy Fuels must reach $14.26 (strike price plus VWAP) by front-month options expiration in order for Tuesday's call buyers to begin profiting. From the natural gas concern's current post at $13.59, that's an advance of roughly 5% into territory not explored since mid-May. Delta on the call stands at 0.34, representing a more than 1-in-3 chance the option will finish in the money at the closing bell on Oct. 18. If the shares stall south of the strike, the most the traders stand to lose is the premium paid.
At the same time, given CLNE's performance on the charts and current short interest levels, some of yesterday's call buyers may actually have been on the lookout for options-related protection
against an extended rally. At present, 23.8% of the stock's float is sold short, so there are quite a few bears that could stand to lose if the stock adds significantly to its meager, year-over-year advance of 2.1%.
As alluded to earlier, a mysterious tweet indicated that tomorrow may be an important day for Clean Energy Fuels Corp going forward. Specifically, the company's top executive remarked, "I promised big news this week and I'll deliver - just not until Thursday Oct 3. Stay tuned."
This article by Alex Eppstein was originally published on Schaeffer's Investment Research.
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