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First Solar, Inc. (FSLR) Option Bulls See New Highs on the Horizon

FSLR weekly call options are heating up

by 4/23/2013 2:56 PM
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The shares of First Solar, Inc. (NASDAQ:FSLR) are up 3% at $39.90, rallying along with the broader equities market. What's more, options traders expect more short-term upside for the stock this week, picking up weekly calls to bet on new highs for FSLR.

Most popular are the weekly 4/26 40- and 41-strike calls, which have seen around 2,000 and 1,400 contracts change hands, respectively. Most of the calls have traded on the ask side, and volume has exceeded open interest at both strikes, underscoring our theory of newly bought bullish bets.

Digging deeper, the 40-strike calls crossed at a volume-weighted average price (VWAP) of $1.05, meaning the buyers need First Solar to conquer $41.05 (strike price plus VWAP) by the end of the week, when the options expire. Meanwhile, the VWAP of the 41-strike calls is $0.64, indicating a breakeven of $41.64. For reference, FSLR hasn't been north of $41 since February 2012, meaning the call buyers are anticipating fresh peaks for the shares. However, risk is capped at the initial premium paid for the contracts, should the stock give back today's gains.

While the options crowd has taken notice of FSLR's longer-term ascent -- the equity has more than doubled over the past year -- the brokerage bunch remains skeptical. Just one analyst has doled out a "buy" or better rating, compared to 14 "holds" and two "sell" or worse suggestions. Likewise, the average 12-month price target of $33.31 represents a discount to First Solar, Inc.'s current perch.

In the same vein, short interest accounts for 27.2% of FSLR's total available float, and would take nearly four sessions to repurchase, at the stock's average daily trading volume. In other words, the bears are alive and well on this outperformer.

Should FSLR extend its quest for new highs, a flood of upgrades and/or price-target increases, or a short-squeeze situation, could translate into contrarian upside for the stock.


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