Plug Power Up Almost 10% As Option Traders Gorge On Calls

Plug Power Inc PLUG is up almost 10% the day after Morgan Stanley analyst Stephen Byrd maintained an Overweight rating on the stock and raised his price target from $43 to 65, which is just below the all-time high of around $75 printed in late January 2021.

What Happened: Friday's trading volume has been strong with more than 23 million shares traded versus its 10 day average of 24 million shares, which it should eclipse by market close.

What is more impressive is the large number of option contracts traded on the day which just passed 200,000 as of this writing (image below).

SEE ALSO: Why Plug Power Shares Are Rising

Why It Matters: Of the approximately 200,000 options traded Friday, more than 164,000 of them were calls and 35,000 puts which means 82 out of every 100 contracts traded on the day were calls. This is an incredibly high ratio of calls to puts and suggests option traders are heavily bullish on the stock.

The largest volume of calls traded is at the $45 strike (~25,000 options), hence it's probable this large concentration of options at this strike could "pin" the market around these prices into the close.

What's Next: Looking forward over the next four expiries, the largest by volume is the Nov. 26 expiry with a solid concentration of volume and open interest between the $42 and $46 strikes, and then lesser interest until the $50 strike (image below).
 

This suggests option traders see a range of support between the $42 and $46 strikes while some have a 'moonshot' target of $50 for next week. Meanwhile, should the stock break below the $42 strike, there is a decent amount of interest between $35 and $40 which may contain any pullbacks next week.

Photo: Freestocks via Unsplash