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The shares of First Solar, Inc. (NASDAQ:FSLR - 32.38) are notably higher at midday, muscling back atop the $32 level for the first time in a month. Against this backdrop, options traders are scooping up soon-to-expire calls to gamble on even more upside for the alternative-energy concern this week.
At last check, FSLR has seen about 31,000 calls cross the tape -- roughly four times its average intraday volume. Meanwhile, fewer than 8,400 FSLR puts have traded thus far.
Attracting the most attention have been the February 31-, 32- and 32.50-strike calls, which have seen around 3,300, 6,700, and 3,000 contracts change hands, respectively. Implied volatility on the 31-strike calls was last seen more than 10 percentage points higher, and volume has exceeded open interest at the higher-strike calls, pointing to new initiations. What's more, the majority of the front-month calls have crossed on the ask side of the tape, hinting at buyer-driven volume.
By purchasing the February 31 calls at a volume-weighted average price (VWAP) of $1.05, the speculators' profit will increase with each step north of $32.05 (strike plus premium paid) through the end of the week, when front-month options expire. Meanwhile, the VWAPs of the 32- and 32.50-strike calls are $0.59 and $0.45, respectively, indicating breakevens of $32.59 and $32.95 for the buyers. However, even if FSLR backpedals prior to Friday's closing bell, the most the traders are risking is the initial premium paid for the calls.
From a broader sentiment standpoint, though, not everyone on Wall Street is so optimistic when it comes to FSLR. The stock currently boasts just three "buy" or better endorsements from the brokerage bunch, compared to 20 "hold" or worse suggestions. Likewise, the consensus 12-month price target on the security stands at a meager $24.76, representing a significant discount to FSLR's current share price.
Plus, despite outperforming the S&P 500 Index (SPX) by nearly 13 percentage points during the past 60 sessions, more than 31% of FSLR's float remains dedicated to short interest. In fact, at the equity's average pace of trading, it would take nearly a week to buy back these bearish bets.
Should FSLR continue to outshine the broader equities market, a flood of upbeat analyst attention or a short-squeeze situation could add fuel to the stock's fire.
In early afternoon action, FSLR has added 6.5% to flirt with the $32.38 level.