SmartHeat has lost more than three-quarters of its value since
the start of 2010, but at least one option trader is bullish on the
obscure Chinese small-cap stock.
optionMONSTER's systems show that 2,000 September 3 calls were
purchased for $0.75 while an equal number of September 3 puts were
sold for $0.40. Volume was more than 7 times open interest in both
The transaction resulted in a net cost of $0.35 and will simulate a
long position in the stock, profiting from a push higher and losing
money if it falls below $3.
HEAT fell 1.09 percent to $3.18 yesterday and has been falling
since early last year, when it peaked over $18. The company's
products are used to transfer and measure heat, mostly for large
industrial and power-generation facilities such as refineries and
The company's last financial report on March 15 showed
year-over-year revenue growth of 52 percent and a 47 percent
increase in earnings. Management said the results met or exceeded
HEAT could also be potentially attractive to some value investors
because it trades at about 3 times forward earnings and its
enterprise value is just 3 times EBITDA. Its long-term
price/earnings growth ratio is just 0.2 times.
Yesterday's trade pushed total option volume in the stock to 13
times greater than average.
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