First Solar, Inc. (FSLR) is lower today, but calls are trading at an accelerated pace
Last night, First Solar, Inc. (NASDAQ:FSLR) presented disappointing first-quarter numbers, sending the shares 1.1% lower to $58.99 in today's session. Options traders expect the stock to stage a quick recovery, though, with calls changing hands at five times the normal intraday pace. It appears traders are buying to open the weekly 5/1 58-strike call, betting on FSLR to hold above $58 through today's session. Specifically, with a volume-weighted average price of $0.99, these traders will profit if the shares move above $58.99 by the close, when the weekly options expire
Today's focus on calls is in stark contrast to what's been occurring of late in FSLR's options pits. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the security has amassed a 50-day put/call volume ratio of 0.79, which ranks only 2 percentage points from an annual high. This means traders have been purchasing puts over calls at a near-annual high pace during the past 10 weeks.
The majority of analysts are skeptical on the shares. For instance, eight of 14 brokerage firms deem FSLR a "hold." Also, the stock is not far from its average 12-month price target of $64.62. Actually, while Needham cut its price target from $75 to $69 just today (but kept its "buy" rating), Cowen and Company raised its price target by $2 to $62.
All of this pessimism has developed even as First Solar, Inc. (NASDAQ:FSLR) has added over 32% in 2015. If the stock rebounds from today's dip and begins surging higher once again, a reversal of analyst and/or trader sentiment could provide a boost. In fact, this is already happening in one area: short interest plummeted by almost 19% during the two most recent reporting periods.