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Call activity is running hotter than usual on First Solar, Inc. (NASDAQ:FSLR) today, as approximately 13,000 contracts have crossed the tape thus far. This is a 21% mark-up over the equity's expected intraday call volume, and more than triple the number of puts exchanged. Also of note, the stock's 30-day, at-the-money implied volatility (IV) has tacked on 2.6 percentage points to rest at 57% (and has been creeping higher since Sept. 20.
Most popular by a landslide is the March 50 strike, which has seen nearly 4,400 calls change hands -- the majority of them at the ask price, suggesting they were bought. More specifically, the contracts traded at a volume-weighted average price (VWAP) of $3.52. Meanwhile, IV has ticked higher at this strike, hinting at the initiation of new positions. What's more, data from the International Securities Exchange (ISE) indicates the presence of some buy-to-open activity here.
In this scenario, the speculators are counting on the solar energy concern to power north of the $53.52 mark (strike price plus the VWAP) by March expiration. This denotes an increase of about 33.5% from the security's present perch at $40.09. The delta for this call sits at 0.38, meaning it has a 38% chance of finishing in the money during its lifetime. Should the shares stay south of the strike price, the most today's traders stand to lose is the initial cash outlay.
However, it should also be noted that short interest currently accounts for a lofty 15.2% of the stock's available float. In other words, some of the aforementioned out-of-the-money call buyers could actually be skeptics looking to hedge their bearish bets.
From a technical perspective, First Solar, Inc. (NASDAQ:FSLR) has advanced more than 30% year-to-date, and north of 81% on a year-over-year basis. What's more, the shares have outperformed the broader S&P 500 Index (SPX) by about 7 percentage points during the past month.
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