SunEdison, Inc. (NYSE: SUNE, $21.80) is scheduled to report earnings following Wednesday’s session close.  Consensus analyst estimates call for negative EPS of $0.33 on revenues of $683.56 million, compared with positive EPS of $0.22 on $960.7 million in revenue. 

SUNE stock is up 12% so far in 2015, having traded in a 52-week range of $13.09-$24.35, having touched the low back in July and the high in early November. 

In the first part of last Friday’s session, we saw a trader come in and buy 3,156 SUNE Mar Weekly Fri 3/6 22.5 Calls for $0.70.  Representing about $221k in long premium, SUNE stock must be trading above $23.20 on Friday 3/6 for this trader’s position to be profitable.  With these calls currently trading about $0.95, this trader has earned paper profits of nearly $79k. 

With the institutional activity and historically strong earnings performance, (SUNE has rallied on three of their past five earnings announcements, coupled with strong performance so far this year, SUNE sets up well for a play to the long side into earnings. 

I would seek to buy the same call line as we saw bought in size, giving myself some additional time to hit profit targets.

My Trade

  • Buy the SUNE Mar Weekly 3/6 22.5 Calls for about $0.95
  • Risk: $95 per 1 lot
  • Reward: Theoretically Unlimited
  • Break-even stock price: $23.45 (at expiration)

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