What happened

Shares of CBAK Energy Technology (NASDAQ:CBAT) stock are dropping in late morning trading Tuesday, down 6.2% as of 11:25 a.m. EST.

As TheFly.com reported late yesterday, there's been a surge in "size put blocks in CBAK Energy Technology" -- or translated into English, someone has been buying large numbers of contracts guaranteeing themselves the right to sell CBAK shares at prices as low as $2.50 per share in the future.

Simple red arrow declining stock chart on a white checked background

Image source: Getty Images.

So what

Essentially, this means that someone, or many someones, have begun placing what are effectively "short" bets against CBAK stock, and this seems to have spooked investors in the company.

CBAK shares closed out Monday trading down 8% after the news broke yesterday. The shares are continuing to trend down in early trading today -- and absent any other news, it's logical to presume that this is for the same reason that investors began selling yesterday afternoon.

Now what

Should you sell, too? That depends. If you're selling because you're worried that someone else might know something you don't know about Kandi, or because they've decided to sell shares of Kandi, then I'm not sure that's necessarily the right way to think about these things.

On the other hand, if you're selling because CBAK Energy is an unprofitable battery maker that's burning cash and carrying more debt than cash on its books at last report, has made some pretty questionable financing decisions this month, or because CBAK owes much of its popularity to a deal to supply batteries to a Chinese automaker that may not actually be making a lot of autos, well, those would seem to be better reasons to sell.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.