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First Solar, Inc. (FSLR) Sees a Flurry of Near-Term Put Activity

Today's uptick in put volume marks a change of pace for FSLR

by 4/4/2013 2:05 PM
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Put players have taken a shine to First Solar, Inc. (NASDAQ:FSLR) today, as nearly 7,800 of these contracts have changed hands so far -- a 60% increase over the equity's expected intraday put volume. Conversely, just over 5,800 calls have crossed the tape. Although a number of traders have zeroed in on FSLR's near-term options, not all of today's put action is of the bearish variety.

Most active has been the April 25 strike, where 1,291 puts were exchanged at a volume-weighted average price of $0.86. Meanwhile, the majority of these contracts traded at the ask price, and implied volatility has climbed more than 4 percentage points during the course of the session -- both indications of buy-to-open activity. In order for speculators to secure a profit, the stock must fall below the $24.14 mark (strike price less the VWAP) by front-month expiration. The delta for these options rests at negative 0.34, giving them a 34% chance of finishing in the money.

Also garnering notable attention is the weekly 4/12 25-strike put, which has seen 1,271 contracts traded -- the majority of them at the bid price, suggesting they were sold. More specifically, these puts crossed at a VWAP of $0.63. Since today's volume outstrips current open interest levels, it's likely that new positions are being added here. In this scenario, the put players are expecting First Solar, Inc. to stay north of $25 through the close on April 12, when these weekly options expire. This would render the contracts worthless, allowing traders to pocket the net credit received.

This penchant for puts over calls is a deviation from FSLR's recent trend. The equity's 50-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio sits at 2.03, indicating calls bought to open have more than doubled puts during the past 10 weeks. In fact, this ratio is just 4 percentage points away from a yearly peak, meaning speculators have been snapping up calls over puts at a near annual-high pace.

Similarly, Schaeffer's put/call open interest ratio (SOIR) for First Solar, Inc. checks in at 0.80, with calls outweighing puts among options expiring within the next three months. This ratio ranks in just the 5th percentile of its annual range, signaling near-term traders have rarely been more call-heavy toward the security during the last 12 months.

The alternative energy firm has had a tough start to 2013, having surrendered more than 15% year-to-date, and lagging the broader S&P 500 Index (SPX) by almost 22 percentage points during the past three months. What's more, the shares are poised to finish a sixth consecutive week below their 10-week moving average, which had previously served as support.

At last check, however, FSLR is up about 0.1% to trade at $26.13.


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