11/4/08

ESLR Update Trading Update

During the last few weeks my Evergreen Solar (ESLR) stock has been down in the dumps. I bought some more shares for $3.05 and sold a March 2.5 call for $1.22. My thinking was that the stock would probably stay a little above $2.50 a share, and I'd make $0.67 a share on that transaction when those shares were called in March (this can still happen). Ignoring all my short calls, my cost basis for ESLR is now $5.18 a share. (All my trades are listed on the right sidebar, near the bottom.) If all the calls expire worthless, my costbasis will be $3.75 a share. That is, the most I can lose on the stock is $3.75. Amazing that I originally bought it over $10 a share. The most I can gain if I don't buy back the calls and the stock is called away is $4.28 a share.

After I bought it at $3.05 near the end of October, ESLR promptly fell lower than $2.50 a share. Oh well, I thought, my cost basis for the last purchase, with the call was $1.83. But instead of buying back all my calls (the Jan '10 7.5s, and the recent Mar '09 2.5) for much cheaper than I sold them, I ended up doing nothing. I wanted to buy them, but they didn't go as low as I wanted them to. I missed buying back the Jan '10 calls by $0.05. I'd have sold them again today, as ESLR is now (11/4/08) trading at over $5.50 a share.

I don't expect it to rally forever, and think that I'll have another opportunity to buy my calls back at a profit and then sell them again. As the stock has soared over 100% since the end of October, I'm looking to buy puts.

Solar stocks are up pretty much across the board, so I don't think there's anything specific to ESLR itself causing its recent rally. ESLR had a crappy earnings report in mid October, then sued Lehman and Barclays towards the end of that month regarding the borrowed shares. There was also a UBS downgrade.

I'm still bullish on the company long term. It just has to survive this recession.

My previous posts on ESLR can be found here.