A lot of skepticism on STP going into earnings on Thursday. Looks like a recipe for volatility. Given the recent news in the past few days on solar stocks which contradicts the gloom and doom talk of gluts and diving prices of the previous several months, there could be a nice bump in the stock on Friday. We'll see. It closed at $15.30 today. Even if there is a miss, it could be discounted.
Option Players Bet on Another Earnings Miss for Suntech Power Holdings Co. (STP)
Andrea Kramer (akramer@sir-inc.com)
11/17/2009 12:16:23 PM
Suntech Power Holdings Co. (STP: sentiment, chart, options) was popular among put traders on Monday, as investors roll the dice ahead of the firm's turn in the earnings spotlight on Thursday. During the course of the session, the solar concern saw close to 8,350 puts change hands, more than quadrupling its average daily volume of fewer than 1,900 contracts.
Most active was the equity's at-the-money November 15 put, which saw roughly 4,500 contracts cross the tape. Sixty-five percent of the puts traded at the ask price, suggesting they were bought. Furthermore, implied volatility skyrocketed 17%, and now stands at 98%. Compared to STP's one-month historical volatility of only 70%, these soon-to-expire front-month options are relatively pricey at the moment.
The spike in put volume echoes the recent trend on the International Securities Exchange (ISE), where speculators during the past couple of weeks have bought to open more than four times as many STP puts than calls. What's more, the stock's 10-day put/call volume ratio of 4.05 ranks in the 97th annual percentile, implying that traders on the ISE have scooped up STP puts at a faster pace only 3% of the time during the past year.
Ahead of earnings, option players aren't the only skeptical bunch. According to Zacks, STP harbors only two "buy" or better ratings, compared to 13 "hold" or worse ratings. However, historically speaking, Suntech has missed the Street's per-share earnings forecast in three of the last four quarters.
At last check, STP has surrendered 2.9% to hover just shy of the $15 level.
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