Sector Headwinds Rattle First Solar, Inc. (FSLR)

Long-term sector outperformer First Solar, Inc. (FSLR) is staring at heavy afternoon losses

Aug 19, 2015 at 1:48 PM
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Fossil fuel stocks are getting hammered today, as crude oil pans six-year lows. However alternative energy names aren't exactly having a walk in the park, with Canadian Solar Inc. (NASDAQ:CSIQ) having a particularly bad session. Following CSIQ lower is sector peer First Solar, Inc. (NASDAQ:FSLR), which is down 4.6% at $49.24 -- making it one of the biggest decliners on the S&P 500 Index (SPX).

Amid this sharp drop, puts are flying off the shelves at more than double the usual afternoon rate. Most active is the January 2016 47.50-strike put, which is seeing buy-to-open activity. In other words, option traders think FSLR will breach $47.50 by January 2016 expiration.

Today's preference for long puts is business as usual. During the last 10 days at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), FSLR has amassed a put/call volume ratio of 0.84 -- in the 71st percentile of its annual range. In other words, speculators have bought to open puts over calls at a faster-than-usual clip of late.

Short sellers have also displayed pessimism toward FSLR. Despite short interest dropping 9.1% in the latest reporting period, almost 9% of the equity's float is still sold short -- representing about four days' worth of trading, at typical volumes.

On the charts, First Solar, Inc. (NASDAQ:FSLR) is sitting on a roughly 10% advance in 2015, despite today's slide. In so doing, it has easily outperformed the sector benchmark Guggenheim Solar ETF (TAN), which has lost nearly 7% over the same time frame. In fact, among the 12 solar stocks we follow, the average year-to-date performance is a roughly 3% loss.

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