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.
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.
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