After a two-week absence void of muscling the After Hours market, Cramerica delivered a gold medal performance in paying homage to the Mad Money’s latest epiphany, Clean Energy Fuels (CLNE). Monday evening, Dr. Cramer noted (umm… pounded his fist for) the natural gas fueling station play. After scanning more than 2,000 stocks during the Olympics, Clean Energy Fuels was determined to be the “perfect stock” regardless of who wins the election.
In all fairness, folks may remember Jimmy sponsoring shares of CLNE, along with Fuel Systems Solutions (FSYS) back on August 1. The latest story is the stock appears to be moving from a more speculative issue and into potential blue chip style momentum as Speaker of the House, Nancy Pelosi, disclosed a position of $100K to $250K in shares of Clean Energy since 2007.
While the Pelosi money trail isn’t that big in the scheme of things, according to Jim, it’s certainly a tell (hint) of the smart money at work. Additionally, with T. Boone Pickens being the company’s largest shareholder, a California-based November ballot initiative for natural gas which bodes well for Clean Energy and a recent earnings beat, it all adds up to “Buy, Buy, Buy!” for Clean Energy.
Figure 1: Clean Energy (CLNE) Weekly
And buy they did. In Tuesday’s session, stock traders drove shares higher by a bit more than 10% to 15.65 in securing a cup-with-handle breakout on 2008’s heaviest volume to date. Shown above is the three month view of the classic pattern, which for less well-promoted issues, has been a difficult chart to truly appreciate. On that note, the weekly view does sport a less-enthusiastic end to the fun, if we’re committed to Elliott Wave’s bearish technical take on CLNE.
Figure 2: Clean Energy (CLNE) Implieds
In Tuesday’s session contract volume also ran very heavy and equally bullish in its commitment to higher prices. Most popular were the still well out-of-money September 17.50 calls. More than 2,100 changed hands with a closing price of 0.35 on implied pricing nearing 60%.
According to early reports from optionmonster.com, most of that volume was on the offer. The demand for the dollar-cheap option helped push premiums on the day. In the back months, implieds are running a bit higher near 63% to 64% but not too far removed from fair value based on an eyeballed estimate of implied and statistical readings.
Above in Figure 2 we can see that current pricing is mostly near the midpoint of historical levels after trending lower for the better part of several weeks.
Figure 3: Clean Energy December 17.50 Call
Also very popular on the session were the December 17.50 calls. Traders likely skipped over the October 17.50 calls, which traded only 81 contracts, as the longer-term option carries an earnings report in its cycle. On the day, a bit more than 1,300 traded and closed at 1.55 on implieds of 63%. While a bit more expensive in terms of theoretical pricing, the 1.22 IV / SV relationship isn’t so severe as to be prohibitive given the softer delta and current light theta factor.
Based on the indicated demand of the September 17.50’s we can determine that not many traders have hedged their options just yet. Some may have used stock, but in consideration of the softer delta and short interest of 17.80%, I’m guesstimating most are simply holding long deltas for the time being. And while you won’t hear or read of a ‘buy rec’ in CLNE from this corner, I like the approach overall—as long as traders have a plan other than waiting for Jimmy to tell them when its time to schnitzel.
Chris Tyler
Staff Writer & Options Strategist
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The information offered here is based upon Christopher Tyler’s observations and strictly intended for educational purposes only, the use of which is the responsibility of the individual.
