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Option Brief: First Solar, Inc. (NASDAQ:FSLR) is flirting with a 12.5% gain at $64.72, after the alternative energy provider offered relatively upbeat earnings guidance. Against this backdrop, FSLR options are flying off the shelves at a rapid-fire rate, especially on the call side. So far, roughly 42,000 calls have changed hands -- five times the norm -- and nine of the 10 most active strikes are calls expiring in the next five weeks.
The most popular call is the March 63 strike, where more than 3,800 contracts have traded. Volume has exceeded open interest at the strike, and close to three-fifths of the calls have crossed on the ask side, pointing to newly bought bullish bets.
By purchasing the calls at a volume-weighted average price (VWAP) of $1.64, the buyers expect First Solar, Inc. (NASDAQ:FSLR) to stay north of $64.64 (strike plus VWAP) through the end of the week, when front-month options expire. Delta on the calls has jumped to 0.69 from 0.21 at yesterday's close, implying a better than 2-in-3 chance of the contracts remaining in the money at expiration.
Risk is limited to the initial premium paid for the calls, should FSLR pare today's gains and backpedal beneath the strike. However, the equity's Schaeffer's Volatility Index (SVI) of 55% sits in the 27th percentile of its annual range, implying that FSLR's short-term options are relatively inexpensive at the moment.