A flurry of large Plug option trades were mixed in nature on Friday as investors decide what to make out of the stock’s two-day surge.
The Plug Trades: On Friday morning, Benzinga Pro subscribers received dozens of option alerts related to unusually large trades of Plug options. Here are a handful of the biggest:
At 9:36 a.m., a trader sold 1,000 Plug call options with a $36 strike price expiring on Friday near the bid price at $15.50. The trade represented a $1.55 million bearish bet.
Less than a minute later, a trader bought 1,184 Plug call options with a $36 strike price expiring on Friday near the ask price at $15.359. The trade represented a $1.81 million bullish bet.
At 10:23 a.m., a trader bought 1,152 Plug put options with a $49 strike price expiring on Feb. 19 near the ask price at $5.295. The trade represented a $609,984 bearish bet.
At 10:40 a.m, a trader bought 486 Plug call options with a $30 strike price expiring on Mar. 19 near the ask price at $24.50. The trade represented a $1.19 million bullish bet.
Why It's Important: Even traders who stick exclusively to stocks often monitor option market activity closely for unusually large trades. Given the relative complexity of the options market, large options traders are typically considered to be more sophisticated than the average stock trader.
Many of these large options traders are wealthy individuals or institutions who may have unique information or theses related to the underlying stock.
Unfortunately, stock traders often use the options market to hedge against their larger stock positions, and there’s no surefire way to determine if an options trade is a standalone position or a hedge. In this case, given the relatively large size of the largest Plug trades they could certainly be institutional hedges.
South Korea Optimism: Wednesday’s Plug Power deal involves SK Group taking a 10% stake in Plug for $1.5 billion, or about $29.29 per Plug share.
Plug shares skyrocketed on Thursday and Friday because investors are optimistic the new deal will get Plug’s foot in the door of South Korea’s “Hydrogen Economy Roadmap” plan. The initiative includes several aspirational goals, including getting 6 million hydrogen fuel cell cars on the road, building 1,200 hydrogen refueling stations and producing 5 million tons of hydrogen fuel annually by 2040.
Plug is both a hydrogen producer and a fuel cell maker, and South Korea could potentially be a massive new customer over the next 20 years.
The news also triggered a wave of bullish analyst commentary on Wall Street. Cowen & Co., B. Riley Securities and H.C. Wainwright all raised their Plug price targets following the SK Group news. H.C. Wainwright said Plug could now generate $12.9 billion in annual revenue and $3.9 billion in annual operating profit by 2030.
Of course, the million-dollar question for clean energy investors sitting on massive gains in a stock like Plug Power is whether or not now is the time to finally cash out of the red-hot stock. Plug shares up 1,290% in the past year and currently trade at 67.1 times sales.
Benzinga’s Take: Of the three $1 million-plus Plug option trades on Friday morning, two were for contracts expiring on Friday, suggesting little about where the buyers and sellers see the stock going in the medium or longer-term.
The $1.19 million call purchase may be the most telling of all given the contracts have a break-even price of $54.50, suggesting another 3.2% upside for Plug over the next two-plus months.
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