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First Solar, Inc. (NASDAQ: FSLR - 26.48) is following the broad-market trend lower this morning, but one group of option players doesn't expect the negative price action to continue in the near term. Of the roughly 6,200 calls that have crossed the tape so far, 16% have traded at FSLR's April 22 strike. The majority of these have gone off at the ask price, implied volatility was up 1.1 percentage points at last check, and only 125 contracts make up open interest here, indicating the initiation of fresh bullish positions.
By purchasing the in-the-money calls for a volume-weighted average price (VWAP) of $4.60, traders will begin to profit with each move above breakeven at $26.60 (strike plus VWAP) First Solar takes through the close on April 19, when front-month options expire. Delta for the call is docked at 0.88, suggesting an 88% chance the position will expire in profitable territory. Risk, meanwhile, is limited to the initial net debit. With implied volatility at this strike deflated relative to FSLR's 20-day historical (realized) volatility (52% vs. 71.5%), traders can rest easy knowing premium for the call is attractively priced at current levels.
Today's campaign for calls just highlights the withstanding trend in the options pits, per data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). During the course of the past 50 sessions, traders have bought to open 165,931 calls, compared to 88,769 puts, bringing the equity's 50-day call/put volume ratio to 1.87. What's more, this ratio ranks just 5 percentage points from a 52-week peak, suggesting calls have been accumulated over puts at a near annual-high clip in recent months.
Additionally, First Solar's Schaeffer's put/call open interest ratio (SOIR) of 0.76 ranks in the lowest percentile reading of its annual range. In other words, short-term speculators are more call-heavy now than at any other point within the last year.
On the charts, the equity has shed roughly 14% year-to-date, with the majority of the deficit coming on the heels of First Solar, Inc.'s late February revenue miss. However, FSLR managed to find a technical friend in the form of its 160-day moving average, and since bottoming out at $24.46 on March 4, the stock has bounced nearly 9%.
As mentioned, FSLR is down around 0.5% in today's session, after a report in Digitimes this morning suggested China could be on the cusp of lowering its solar incentives. At last check, FSLR was trading at $26.48.