Walmart's New Health Food Push: Is It Too Hard to Swallow?
Bonds Are a 'Safe' Investment: A Big Lie Gets Even Bigger
Late Wednesday, the EnerDel unit of Ener1 Inc. (NASDAQ: HEV) scored a grant from the Obama administration to make battery parts. The company's $118.5-million handout was part of a $2.4-billion grant package doled out to automakers and related firms by the federal government in order to fund the domestic development of next-generation car batteries.
Indiana-based Ener1 says that the Obama grant, along with $480 million in Department of Energy loans it's applied for, should translate to rapid growth in its staff. The company has 150 employees currently, but said that number could surge to 3,000 workers as soon as 2015.
The news has helped attract some attention to the relatively under-the-radar shares of HEV, just in time for the company's second-quarter earnings release. Those numbers are due to be reported after the market closes today, with analysts looking for a loss of roughly 10 cents per share.
Ahead of the event, option players are loading up on calls. Shortly after the open today, a block of 200 September 7.50 calls changed hands near the ask price, sending implied volatility up 4.4% as a result. This back-month call is currently out of the money by a narrow margin.
In fact, during the past 10 days, traders on the International Securities Exchange (ISE) have bought to open nearly 35 times more calls than puts on HEV, revealing a distinctly optimistic bias. However, after checking out the stock's lofty short-to-float ratio, it seems safe to assume that some of these call purchases are simply hedged bets by short sellers.
Specifically, short interest on the stock rose by 16.6% during the most recent reporting period, and now accounts for 6.9% of HEV's float. At the equity's average daily trading volume, it would take 18.5 days for all of these shorted shares to be repurchased.
With yesterday's announcement placing fresh attention on Ener1, the pressure is on for tonight's earnings report. A burst of positive momentum on Wednesday propelled the stock above stubborn resistance at the $7 level, but a second-quarter disappointment could easily send the shares reeling back below this stubborn obstacle. Conversely, an upside surprise could prompt a mass unwinding of bearish bets among short sellers, sending the shares sharply higher.
While there's no way of knowing yet how Ener1's second-quarter figures will shake out, it seems safe to say that investors should prepare themselves for a volatile few days of trading.
Elizabeth Harrow is an analyst and financial writer in the research department at Schaeffer's Investment Research. She is featured in the video series Schaeffer's Daily Q&A on SchaeffersResearch.com.
Goldman Earnings Sink After Buffett Dividend
Johnson & Johnson's Income Falls 23%
Burberry Shares Leap on Sales Update
