Solar energy stocks have been one of 2020’s biggest winners, with the Guggenheim Solar ETF (TAN) soaring more than 200% so far this year. Many stocks in the space have picked up even more steam as of late and are significantly outperforming that number.
Photovoltaic cell manufacturer SunPower, for example, has skyrocketed more than 480% this year. One trader in the options market is using an unusual strategy to make a $3.4 million bet that the solar energy surge isn’t ending any time soon.
“We saw seven times the average daily put volume [in SunPower], and normally we might think that means that traders are making bearish bets. That’s not necessarily the case here. This stock has been climbing a wall of worry with only four of 15 analysts having bullish recommendations on this stock,” Optimize Advisors CIO Michael Khouw said Tuesday on CNBC’s “Fast Money.”
Despite analysts’ unwillingness to believe the hype and get bullish on the stock, which has risen 500% in the last six months alone, there’s at least one trader willing to buck the trend and bet that the bottom isn’t falling out in the near future.
“The most active options were the Feb. 29-strike puts. I saw 10,000 of those trade for $3.40 per contract. Sellers of those puts are going to be obligated to buy the stock at $29, so obviously they’re making a bullish bet, and they’re only going to have the stock put to them down about 13% from where it’s currently trading,” said Khouw.
This is an interesting way to make a bullish bet on a stock, because instead of buying calls and owning upside — either due to the call contracts appreciating in value or by taking ownership of the stock at a discount upon expiration — this trader is choosing to collect $3.4 million in premium up front and will make a profit as long as SunPower isn’t trading for less than $25.60 per share by February expiration.
SunPower was trading about 2% lower in Wednesday’s session.