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Canadian Solar Inc. Technical Prowess Expected to End


Yesterday's bears pick up CSIQ's July 10 puts.

Put activity soared by almost five times the daily norm in Canadian Solar Inc.'s (NASDAQ:CSIQ) options pits yesterday, as roughly 6,100 puts crossed the tape. A good chunk of this activity took place at the July 10 strike, where 1,168 contracts changed hands at a volume-weighted average price (VWAP) of $0.38. Of these contracts, 65% went off at the ask price, open interest added 600 positions overnight, and implied volatility increased, implying the majority of the activity was of the buy-to-open nature.

On the charts, CSIQ has skyrocketed a jaw-dropping 224% year-to-date to trade at $11.19. Even more, the stock has outperformed the broader S&P 500 (INDEXSP:.INX) by 172 percentage points during the past three months. Plus, it reached a two-year high of $12.69 on Monday. Still, yesterday's put buyers are betting CSIQ will make a turn for the worse, falling south of the breakeven price of $9.62 (strike price less the VWAP) by the close on July 19, when front-month options expire. Should the stock fail to make the 14% dip -- remaining north of the 10 strike -- the most the put buyers stand to lose is the initial premium paid.

Yesterday's acceleration of put activity is nothing out of the ordinary in CSIQ's options pits as of late. In fact, the stock's International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) 50-day put/call volume ratio of 0.33 ranks in the 97th percentile of its annual range, conveying speculators have snatched up CSIQ puts over calls at a faster rate just 3% of the time within the last 12 months. Likewise, CSIQ's Schaeffer's put/call open interest ratio (SOIR) of 0.85 ranks higher than 95% of other such readings taken throughout the year, meaning put open interest among options with a shelf-life of three months or less -- relative to call open interest -- is also at a near-annual high.

This article by Milissa Hudepohl was originally published on Schaeffer's Investment Research.

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