A Pre-Earnings Options Preview for LDK Solar Co., Ltd

By
A A A

LDK Solar Co., Ltd (ADR) ( LDK ) is slated to step into the earnings confessional early next week, and option players are hoping the alternative energy source performs as well as sector peer Trina Solar Limited (ADR) ( TSL ), which issued a positive earnings surprise on Tuesday morning. In fact, LDK speculators have been upping the bullish ante at a rapid-fire rate. At the International Securities Exchange (ISE), Chicago Board Options Exchange ( CBOE ), and NASDAQ OMX PHLX (PHLX), the stock's 10-day call/put volume ratio has soared to 46.50 from its Aug. 1 reading of 1.03. What's more, the current ratio ranks in the 93rd percentile of its annual range, meaning calls have been bought to open over puts with more rapidity just 7% of the time within the past year.

Not surprisingly, the stock's Schaeffer's put/call open interest ratio (SOIR) sits at 0.49. Not only does this show that call open interest more than doubles put open interest in the front three-months' series of options, but it ranks lower than 95% of similar readings taken during the last 12 months. Simply stated, short-term speculators have rarely been more call-heavy toward LDK throughout the previous 52 weeks.

Part of this call-skewed trend could be due in part to the stock's present price. Remember, the the maximum potential reward for a long put is restricted to the strike price minus the premium paid. With LDK currently hovering near $1.69, there is limited profit potential for implementing a put-buying strategy.

Outside of the options pits, sentiment toward LDK is lukewarm. Only one analyst is covering the stock, and he maintains a tepid "hold" rating. Meanwhile, although short interest rose 4.1% in the most recent reporting period, it still only accounts for 4.9% of the stock's available float.

LDK Solar's history at the earnings plate leaves much to be desired. The company has fallen short of analysts' bottom-line expectations in seven of the last eight quarters. Plus, the stock averages a respective loss of 1.9% and 1.2% in the day and week following its report. When LDK Solar reports earnings ahead of next Tuesday's open, Wall Street is expecting the company to record a second-quarter loss of 92 cents per share -- a $1.08 improvement from its year-ago results.

This article by Karee Venema was originally published on Schaeffer's Investment Research .

Below, find some more great content from Schaeffer's Investment Research:


Daily Game Plan - Nasdaq Glitch Halts Rally

Hedge Funds Have Missed This Rally and Why That Is a Good Sign

A New High for DreamWorks Animation SKG, Inc. ( DWA ) Attracts Bulls


Twitter: @schaeffers



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Options

Referenced Stocks: CBOE , DWA , LDK , TSL

Minyanville

Minyanville

More from Minyanville:

Related Videos

Stocks

Referenced

Most Active by Volume

44,823,339
  • $75.19 ▲ 0.28%
43,744,171
  • $3.44 ▼ 0.29%
42,340,022
  • $97.671 ▲ 0.66%
34,178,145
  • $17.62 ▼ 1.23%
34,028,998
  • $15.59 ▼ 0.19%
32,055,708
  • $21.23 ▼ 2.41%
31,539,235
  • $3.76 ▲ 0.80%
30,434,619
    $34.25 unch
As of 7/25/2014, 04:03 PM