CSUN Options Surge Ahead of Earnings

China Sunergy (CSUN) shares dropped sharply Thursday despite bullish options activity. The Chinese solar manufacturer saw more than 6,000 call options change hands, which is more than 7x its average daily volume of 877 contracts. The majority of the trading took place at the September $10 and $12.50 calls, which suggests that traders are very bullish on the stock over the next 29 days. The move follows similar sentiment ealier this week with about 53 calls for every put purchased on the stock over the past 10 days.

The huge increase in options activity comes ahead of the firm’s earnings announcement on Friday. China Sunergy has beat Wall Street estimates during the past two quarters and many options traders are betting that they will this quarter as well. Many of the company’s peers - like Suntech Power Holdings (STP) - have also announced positive earnings. There has been particular interest in the earnings outlooks for solar stocks, which have proven to be rather bullish for many in the sector.

Earlier this year, China Sunergy reported a 7.8% increase in revenues from the previous quarter and reaffirmed its 2008 profit forecast for the year. Revenues were up 7.8%, which was better than expected given a three-week interruption to their operations and higher wafer costs during the quarter that pressured margins. The improved financial performance was thanks in large part to higher ASP achieved by successfully ramping high efficiency cell production levels and improvements to operations.

China Sunergy is engaged in designing, developing, manufacturing and selling solar cells. It manufactures solar cells from silicon wafers utilizing crystalline silicon cell technology to convert sunlight directly into electricity through a process known as the photovoltaic effect. It sells its solar cell products to Chinese and overseas module manufacturers and system integraters, who assemble solar cells into solar modules and solar power systems for use in various markets.

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