Solar stock Yingli Green Energy is experiencing more than 3 times its usual put option volume today, as investors have flocked to load up on bearishly oriented options on the company. Most notably – with February options set to expire in a matter of hours – Yingli's February 27.50 put has seen 2,661 contracts cross the tape on open interest of 3,642, while the February 25 put has traded volume of 1,270 contracts on open interest of 2,331.
The preference for put options in today's trading is likely a direct result of YGE's recently reported fourth-quarter earnings. The company earned the equivalent of $19 million, or 15 cents per American Depositary Receipt (ADR), during the recently concluded quarter. Revenue increased to $199.2 million. The numbers fell short of many analysts' expectations, and the stock was down about 11% at last check.
The selling mood has extended throughout the entire solar sector today. Even First Solar (FSLR), fresh off its own well-received earnings report, is nearly 3% lower as we head towards the close.
However, it looks as though an earnings disappointment was nearly inevitable, considering the wealth of bullish sentiment surrounding Yingli. For starters, the Schaeffer's put/call open interest ratio has declined steadily since the beginning of 2008, and now rests at 0.55. This reading reveals that calls are nearly twice as popular as puts among near-term options.
Analysts are also enthusiastic about YGE's prospects. Zacks reports that the shares have garnered no less than 7 "strong buys" from brokers, compared to 2 "holds" and 1 "sell." This top-heavy configuration leaves the stock vulnerable to downgrades, especially in light of today's weak report. In fact, some brokerage backlash has already hit the stock today. Morgan Stanley reiterated its "underweight" rating on the shares, with analyst Max Lee noting, "...if we consider the likely margin pressure from rising raw material costs, there will likely be no earnings growth in the first half of the year."
So far, YGE's losses have been contained by the stock's newly supportive 10-day and 20-day moving averages. However, a longer-term look at the shares reveals that YGE's 10-week and 20-week trendlines recently completed a bearish cross, which could serve as stiff resistance to turn away any future rally attempts.
And short-covering support is unlikely to give the shares a lift – short interest on YGE declined by nearly 15% during the most recent reporting period as many bears took their profits off the table. It would now take less than 1 trading day for this meager accumulation of shorted shares to be fully repurchased.
Overall, the combination of bullish sentiment with bearish price action – not to mention disappointing fundamentals – suggests that YGE shares could be subject to continued selling pressure during the near term.
For more commentary on today's market-moving news from me and my colleagues Andrea, Jocelynn, Mark, Joseph and Beth, please visit our Schaeffer's Daily Market Blog section throughout the trading day.
Source: Schaeffersresearch|by Elizabeth Harrow
The preference for put options in today's trading is likely a direct result of YGE's recently reported fourth-quarter earnings. The company earned the equivalent of $19 million, or 15 cents per American Depositary Receipt (ADR), during the recently concluded quarter. Revenue increased to $199.2 million. The numbers fell short of many analysts' expectations, and the stock was down about 11% at last check.
The selling mood has extended throughout the entire solar sector today. Even First Solar (FSLR), fresh off its own well-received earnings report, is nearly 3% lower as we head towards the close.
However, it looks as though an earnings disappointment was nearly inevitable, considering the wealth of bullish sentiment surrounding Yingli. For starters, the Schaeffer's put/call open interest ratio has declined steadily since the beginning of 2008, and now rests at 0.55. This reading reveals that calls are nearly twice as popular as puts among near-term options.
Analysts are also enthusiastic about YGE's prospects. Zacks reports that the shares have garnered no less than 7 "strong buys" from brokers, compared to 2 "holds" and 1 "sell." This top-heavy configuration leaves the stock vulnerable to downgrades, especially in light of today's weak report. In fact, some brokerage backlash has already hit the stock today. Morgan Stanley reiterated its "underweight" rating on the shares, with analyst Max Lee noting, "...if we consider the likely margin pressure from rising raw material costs, there will likely be no earnings growth in the first half of the year."
So far, YGE's losses have been contained by the stock's newly supportive 10-day and 20-day moving averages. However, a longer-term look at the shares reveals that YGE's 10-week and 20-week trendlines recently completed a bearish cross, which could serve as stiff resistance to turn away any future rally attempts.
And short-covering support is unlikely to give the shares a lift – short interest on YGE declined by nearly 15% during the most recent reporting period as many bears took their profits off the table. It would now take less than 1 trading day for this meager accumulation of shorted shares to be fully repurchased.
Overall, the combination of bullish sentiment with bearish price action – not to mention disappointing fundamentals – suggests that YGE shares could be subject to continued selling pressure during the near term.
For more commentary on today's market-moving news from me and my colleagues Andrea, Jocelynn, Mark, Joseph and Beth, please visit our Schaeffer's Daily Market Blog section throughout the trading day.
Source: Schaeffersresearch|by Elizabeth Harrow
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