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Bulls Circle as First Solar, Inc. (FSLR) Jumps On Upbeat China Outlook

FSLR's July 50 call is seeing buy-to-open activity today

by 7/15/2013 11:59 AM
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A sector-wide rally has shares of First Solar, Inc. (NASDAQ:FSLR) trading 5.8% higher today to linger near $50.39. As a result, call volume has soared to nearly three times its average intraday pace, with a number of speculators betting on $50 to hold as round-number support through week's end.

The July 50 call is the most active strike thus far, where 4,783 contracts have traded, almost two-thirds at the ask price. Implied volatility is up 7.3 percentage points, and data from the International Securities Exchange (ISE) confirms buy-to-open activity. While these calls are currently in the money, the stock needs to tackle $51.36 (strike plus volume-weighted average price of $1.36) ahead of this Friday's close in order for the speculators to turn a profit. First Solar hasn't surmounted this breakeven mark since taking an 11% plunge on the heels of its mid-June buyback announcement.

However, the equity has been in technical redemption mode since bottoming out at its most recent low of $40.46 on June 21, with the shares up 25%. As such, bulls have been piling on. During the course of the past 10 sessions, traders at the ISE, Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open 26,060 calls, compared to 8,853 puts. The resultant call/put volume ratio of 2.94 ranks higher than 91% of similar readings taken in the past year, suggesting calls have been accumulated over puts at a near annual-high clip of late.

Echoing this trend is the equity's Schaeffer's put/call open interest ratio (SOIR) of 0.67, which ranks in the lowest percentile reading of its annual range. In other words, short-term speculators are more call-heavy now than at any other time within the last year.

For a stock that's tacked on 253% on a year-over-year basis, it's certainly not surprising to see this bullish bias. This upward momentum is continuing in today's session, on news that China will reportedly increase its solar capacity to five times current levels by 2015. Should First Solar, Inc. (NASDAQ:FSLR) fail to maintain its newfound foothold atop the round-number $50 mark by week's end, the most today's call buyers have risked is the initial premium paid.


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