Shares of JA Solar Holdings Co., Ltd. (NASDAQ: JASO, Stock Forum) have bucked the broad-market trend lower, soaring to a new annual high of $7.92 – in a neighborhood the solar concern hasn't explored since October 2008. Nevertheless, it appears the options crowd is growing more stubborn in its skeptical view of the stock, as evidenced by the accelerated affinity for long puts lately.
By Monday’s closing bell, JASO had seen roughly 7,100 puts cross the tape – about seven times its predicted single-session volume of fewer than 1,000 puts. More than three-quarters of the action centered on the near-the-money November 7 put, which saw about 5,500 contracts exchanged – 76% of which traded at the ask price, suggesting they were bought. Plus, all of the puts translated into fresh open interest overnight, confirming our suspicions of newly-purchased pessimistic positions
However, a closer look at JASO’s sentiment set-up reveals that bearish bets have become par for the course for the stock. The security currently sports a 10-day put/call volume ratio of 9.18 on the International Securities Exchange (ISE), implying that traders during the past two weeks have bought to open more than nine puts for every call on the stock. What's more, this lofty ratio stands higher than 99% of all others taken during the past year, indicating that speculators on the ISE have initiated bearish bets over bullish at a faster clip just 1% of the time.
In the newly front-month October series of options, traders have added new pessimistic positions at the near-the-money 7 strike. More specifically, during the past 10 sessions, put open interest at the October 7 strike ballooned by roughly 6,500 contracts – making the near-the-money strike the clear-cut home to peak put open interest in the front-month series, with almost 9,500 contracts now in residence.
However, this notable accumulation of bearish bets could actually be a boon for the security in the near term, which would help JASO secure its foothold atop the $7 level. This region has played the part of staunch resistance for the stock in 2010, but could now switch roles with help from options-related support at the 7 strike.
In addition, the lingering skepticism on the Street could also translate into buying power for JASO. Despite outshining the broader S&P 500 Index (SPX) by 48% during the past 60 sessions, the stock's average 12-month price target sits at $8.48, implying expected upside of just 7% to JASO's new high of $7.92. Furthermore, Zacks reports that eight out of 17 analysts maintain "hold" or worse recommendations on the equity.
Should the shares of JASO continue their pilgrimage into the black, a reversal in sentiment among the options crowd, or a wave of upbeat analyst attention, could add fuel to the stock's fire.
Disclosure: Andrea Kramer has no financial interest in any of the equities or products mentioned in this column.