Filed under: Analyst reports, Good news, Industry, Options, Technical Analysis, Politics, Suntech Power Hldgs ADS (STP)
Suntech Power Holdings Co. Ltd. (NYSE: STP) shares are are continuing to rise after last week’s comments by analysts that suggested a separate energy-tax package if solar tax incentives don’t make it into the current energy bill. The comments set off a bullish sector rally on Wall Street that looks like it is continuing into this week. If you think that the company won’t fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on STP.
After hitting a one-year low of $29.25 last December, the stock hit a one-year high of $84.94 on Friday. STP opened this morning at $79.32. So far today the stock has hit a low of $78.59 and a high of $82.15. As of 11:05, STP is trading at $80.20, up $1.03 (1.3%). The chart for STP looks bullish and steady, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.
For a bullish hedged play on this stock, I would consider a January bull-put credit spread below the $50 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn’t do what you think but still leverage nice returns. This particular trade will make a 4.2% return in just 7 weeks as long as STP is above $50 at January expiration. Suntech would have to fall by more than 37% before we would start to lose money.
STP hasn’t been below $55 since October and has shown support around $65 recently. This trade could be risky if the cost of energy falls, but even if that happens, there should still be demand for alternative energy innovation.
Brent Archer is an options analyst and writer at Investors Observer. At publication time, Brent neither owns nor controls positions in STP.
Read | Permalink | Email this | Comments
Entries (RSS)