Trade Summary: August 11, 2014
August 11, 2014
Trade Rationale
With an uptick in volatility recently, it may have become easy for investors to forget some of the big picture themes across the market. Yes, international conflict and war certainly does grab headlines. However, environmental and energy problems are much bigger issues over time than any military conflict in the news.
Let’s not forget the importance of renewable energy. Not only are fossil fuels dwindling, but the climate and pollutions levels would benefit substantially from a rise in renewable energy usage.
For this set of trades, we’re going to buy upside in three different alternative energy sources. First off, we’re going to buy into the most popular renewable energy source, solar power. Next, we’ll go long in the highly efficient wind power industry. Finally, we’re going to jump on board one the hottest industries today, hydrogen fuel cells.
Let’s take a closer look…
First off, for our solar power play, we’re going to buy calls on SunPower (SPWR). SPWR develops the most efficient mass-produced solar panels on the market. The company serves residential, commercial, and utility customers, so it provides excellent representation of the solar power market in general.
For wind power, we’ll grab calls on American Superconductor (AMSC). It’s difficult to find a pure wind power company, and the one remaining wind power ETF doesn’t have options. However, AMSC is a good but small company with half its business in wind power. The company’s control systems are vital to wind turbines and are widely used in many wind power systems across the world.
Finally, we’re going to go long the hydrogen fuel cell industry buy purchasing calls on Plug Power (PLUG). Fuel cells are becoming an increasingly effective method of powering vehicles (and more). The industry is a bit more volatile because it’s newer than solar and wind, but it doesn’t make it any less exciting. PLUG is already generating impressive interest in its products, including a highly visible purchase order from Walmart (WMT).
Keep reading for the details of each trade.
Trade Details
#1) Buy SunPower (SPWR) September 20th 35 Calls up to $2.60
We’re looking for a higher move in SPWR. Our first profit point for conservative traders is at $38. For aggressive traders, you can hold up to $42. For risk control, the conservative exit level is $31. $28 is the final exit level for aggressive traders.
#2) Buy American Superconductor (AMSC) January 2 Calls up to $0.55
In this case, we want AMSC to go higher. Our first exit point for conservative traders is at $2.50. For aggressive traders, you can hold to $4.00. For risk control, the conservative exit level is $1.40. And, $1.00 is the final exit level for aggressive traders.
#3) Buy Plug Power (PLUG) November 6 Calls up to $1.05
Finally, we’re looking for a higher move in PLUG. Our first profit-taking exit point for conservative traders is at $7.00. For aggressive traders, you can hold up to $10. For risk control, the conservative exit level is $4.50. $3.00 is the final exit point for aggressive traders.
Category: AOA Trade Summary
