Volatility Expectations Explode Ahead of First Solar, Inc., Fitbit Inc Earnings

The options market is pricing in huge post-earnings moves for First Solar, Inc. (FSLR) and Fitbit Inc (FIT)

Aug 1, 2016 at 10:57 AM
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The earnings calendar will stay hot this week, suggesting stocks could go on a wild ride. Among the companies scheduled to report earnings in the days upcoming are alternative energy stock First Solar, Inc. (NASDAQ:FSLR) and fitness tracker Fitbit Inc (NYSE:FIT). Below, we'll take a closer look at what options traders are expecting heading into FSLR and FIT earnings.

FSLR is slated to tell all on Wednesday night, and options traders are pricing in some serious volatility to result. Specifically, the market is pricing in an 11.8% swing in either direction in the session subsequent to the company's earnings report. Historically, the stock has moved a slightly more modest 9.2% in the day following the past eight earnings events -- with five resolving to the upside.

Options traders are once again counting on post-earnings gains from FSLR. During the last two weeks at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), speculators have bought to open nearly four calls for each put. The resultant call/put volume ratio of 3.87 rests 5 percentage points from an annual high. The said, short interest jumped nearly 30% during the most recent reporting period, and accounts for almost 15% of the stock's float, suggesting some of these calls may be of the protective sort.

Technically speaking, First Solar, Inc. is 1.9% higher today at $47.55. However, on a year-to-date basis, the shares have surrendered almost 28% of their value, and haven't closed above $50 since early June.

Expectations are high heading into FIT earnings, too, scheduled for tomorrow night. At the ISE, CBOE, and PHLX, traders have bought to open 2.77 calls for every put over the last two weeks. However, the same protective caveat mentioned above applies here, since more than 34% of the stock's float is sold short. Plus, FIT has been dismal on the charts, down 54% year-to-date at $13.62.

Things could get even worse in the aftermath of earnings. Fitbit Inc has fallen in each of its five post-event sessions since going public, averaging a one-day loss of 13.1%. Even more volatility is being priced in this time around, with the market expecting a single-day swing of 22.2%.

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