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Long/short equity, event-driven, homebuilders, currencies
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I added ReneSola (NYSE:SOL) to my solar portfolio for the first time as a speculative play based on heavy call volume at the October 7.5 strike. I do not know what those call buyers expected, but certainly Wednesday’s news is typically not conducive to bullish feelings in the next month or so: an acquisition, issuance of more shares, and a reduced revenue outlook based on lower prices. Nevertheless, the stock is up about 3% on the day at the time of posting. (I have written before about the difficulty in interpreting the precise implications of options trading volume.)

In the end, it is not the news itself but the reaction to the news that matters, especially with speculative plays. Remember that MEMC Electronic Materials (WFR) issued an earnings warning earlier this month and is now up 19% partially aided by take-over speculation.

I continue to hold SOL for now (WFR was sold last week).

Be careful out there.

Full disclosure: long SOL calls

Source: Watch Trading Reaction to ReneSola’s News