Trader Finds Creative Way to Bet Bearishly On First Solar, Inc. (FSLR)

One speculator initiated a synthetic short position on First Solar, Inc.

Digital Content Group
Dec 17, 2014 at 10:23 AM
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Things have been pretty gloomy for First Solar, Inc. (NASDAQ:FSLR), which has lost nearly a quarter of its value this year to perch at $41.19. Yesterday, in fact, the shares dropped 1.8% and touched an annual low of $40.78, despite Morgan Stanley giving the company a 50% chance of launching a yield co, while maintaining an "equal weight" rating and issuing a new $47 price target. This flurry of developments brought options traders to the table, too, as contracts crossed at nearly triple the expected daily clip.

One of Tuesday's more interesting transactions involved the simultaneous initiation of a 2,000-contract long position at the January 2015 45-strike put and identically sized short position at the January 2015 45-strike call. In other words, this speculator implemented a synthetic short to gamble on additional downside in FSLR over the next five weeks.

A high degree of pessimism is detected throughout the options pits. During the last 10 days, FSLR puts have been bought to open at a faster rate than calls, according to data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). The resultant put/call volume ratio of 1.37 rests just 2 percentage points from an annual bearish extreme.

This morning, though, while First Solar, Inc. (NASDAQ:FSLR) earlier stumbled to a fresh low of $40.54, the shares were last seen up 0.7%. Helping the stock -- and the solar sector, more generally -- is news that the U.S. Commerce Department will impose a stiff tariff on solar equipment imported from China and Taiwan.

Daily Chart of FSLR Since January 2014

 

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