Trades on Solar Companies Show Optimism in Sector

By TENNILLE TRACY

NEW YORK -- Options traders rallied around solar stocks, as the price of oil climbed above $70 a barrel and voters headed to the polls for an election that could change the political landscape in Washington.
The trading in First Solar Inc. was particularly heavy, as investors picked up 31,000 calls that allow them to buy the company's stock and 23,000 puts that allow them to sell it, according to Trade Alert.
Traders appeared most interested in November calls that allow them to buy First Solar for $200. Priced at $6.90, the contracts make money if the company's shares pull above $206.90 before Nov. 21. The stock closed at $177.52, up 9.6%, Tuesday on the Nasdaq Stock Market.
Options traders gravitated toward LDK Solar Co. as well, picking up nearly five times as many calls as puts. In this case, they focused on November $25 calls, which are priced at $2.40 and make money if LDK jumps above $27.40. LDK shares closed at $23.49, up 4.8%, on the New York Stock Exchange.
Investors also showed a preference for bullish contracts in Solarfun Power Holdings Co. With trading in Solarfun heating up to five times the normal level, investors picked up 15,000 calls and 3,000 puts.
The bulk of the action in Solarfun took place in November $10 calls. Those contracts are priced at 75 cents and make money if Solarfun reaches above $10.75. The shares ended the session at $8.95, up 8.6%, on Nasdaq.
Tuesday marked the second day in a row in which traders jumped on solar stocks as the action coincided with a jump in oil prices. Oil prices rose $6.62 to settle at $70.53 a barrel after the dollar lost strength against the euro and a decision by the Organization of Petroleum Exporting Countries to cut production started to take hold.
"Many of the stocks mentioned in this sector have already announced earnings, and yet the implied volatilities are still remaining near their highs for the year," said Brian Overby, senior options analyst with TradeKing.
Options traders also were eager to take up positions in Nasdaq stocks Evergreen Solar Inc. and Canadian Solar Inc.
In Evergreen Solar, traders scooped up three times as many calls as puts and showed interest in November $7.50 calls. Priced at 20 cents, the contracts make money if the company's stock climbs above $7.70. Evergreen closed at $5.29, up 13%.
In Canadian Solar, traders gravitated toward November $12.50 calls. Those contracts are priced at $1.65 and make money if Canadian Solar reaches above $14.15. The shares closed at $12.50, up 15%.
Write to Tennille Tracy at tennille.tracy@dowjones.com