Pre-Earnings Bears Take a Shine to First Solar, Inc. (FSLR)

Option traders expect post-earnings losses from First Solar, Inc.


Published on Nov 5, 2014 at 12:47 PM
Updated on Apr 20, 2015 at 5:32 PM

Unlike sector peer SolarCity Corp (NASDAQ:SCTY), First Solar, Inc. (NASDAQ:FSLR) is slightly higher this afternoon at $57.01, ahead of tomorrow night's turn in the earnings confessional. However, at least one group of options traders is wagering on post-event downside.

Taking a quick step back, puts are changing hands at more than double the expected intraday rate, and at about four times the pace of calls. Most active is FSLR's November 54 put, where 3,213 contracts are on the tape. Almost all of them have traded at the ask price, implied volatility has edged 3.8 percentage points higher, and volume outstrips open interest -- collectively hinting at newly bought bearish bets.

By scooping up the puts, today's speculators expect FSLR to tumble below $54 by the close on Friday, Nov. 21, when front-month options expire. However, delta on the contract sits at negative 0.33, representing a slim 1-in-3 chance the option will be in the money at expiration.

As alluded to earlier, First Solar Inc. (NASDAQ:FSLR) will step up to the earnings plate Thursday night, and analysts are calling for a per-share profit of 64 cents. Looking back, things have tended to get volatile in the aftermath of the company's last eight quarterly events. The stock's average single-session, post-earnings move is 10.1%, which includes a 17.6% gain last November.

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