It’s been an incredible run for Plug Power Inc (NASDAQ: PLUG) as the price has gone from $4 to over $14 in a two-month period. When this happens, it makes you wonder when the sellers will start to materialize, and the trend will correct. Corrections come in different forms and the previous correction in July saw extraordinarily little pullback. As the price wavered on Friday, option bears began to buy puts looking for more downside.
After trading mostly between $3 and $4.75 from November through May, the price finally broke out at the beginning of June. The breakout coincided with the increase in interest in electric vehicles and hydrogen fuel cell technology. The extreme interest caused the price to make a parabolic move into its July high over $10 and then another run from $8 to over $14.
With parabolic moves, the volume typically explodes as the price appreciates quickly and traders are buying at market. These “weak hands that buy at any price eventually also sells at any price. This can even quicker moves lower after the significant ascent.
On Friday, the put option volume was nearly two times the average. Nearly 37% of the put volume was filled at the ask price and 35% filled in between the market. While the volume wasn’t decidedly on the buyer’s side, a large trade for 8,126 contracts on the 18 SEP 20 $10 put was filled at $0.31.
Action to Take: While the trade filled between the market, the indication is that it was a large buy order. The strike price and expiration provide a target of $10 over the next 26 days.
Speculators can buy the 16 OCT 20 12/10 long put vertical for $0.80.