Evergreen Solar, Inc. Tackles Resistance

04/01/2009 9:32 am EST


Nick Perry

Equity Options Trader, Schaeffer's Investment Research

Although the stock has been wallowing below $5 per share since last November, Evergreen Solar, Inc. (ESLR) is starting to attract bullish attention from option traders. During the past five days, investors on the International Securities Exchange (ISE) have bought 1,793 calls on ESLR, compared to just 100 puts. In other words, bullish bets have been nearly 18 times more popular than their bearish counterparts.

Among April- and May-dated calls, open interest is relatively thin. The June 2.50 call is far and away the most popular near-term ESLR option, with open interest of 10,020 contracts. By contrast, there are just 1,214 puts in open interest at the June 2.50 strike.

Taking a look at the rest of the equity's sentiment backdrop, it's possible that short sellers have been purchasing calls as hedges. Short interest on ESLR jumped by 10.6% during the past month, and now accounts for a respectable 16.1% of the stock's float. At ESLR's average daily trading volume, it would take 7.2 days for all of these bearish bets to be covered.

Short sellers might be seeking portfolio protection due to the recent rally in the broader equities market, which swept ESLR higher. In fact, the stock is poised to settle atop resistance from its 80-day moving average for the second time in three sessions.

By Nick Perry of Schaeffer’s Trading Floor Blog


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