Option Bulls Active as First Solar, Inc., Canadian Solar Inc. Heat Up

First Solar, Inc. (NASDAQ:FSLR) and Canadian Solar Inc. (NASDAQ:CSIQ) calls are being targeted by short-term option traders

by Alex Eppstein

Published on Dec 16, 2015 at 1:52 PM
Updated on Jun 24, 2020 at 10:16 AM

Solar stocks are having a day in the sun, after Congress voted to extend investment tax credits beyond 2016. Among the names blazing up the charts are First Solar, Inc. (NASDAQ:FSLR) and Canadian Solar Inc. (NASDAQ:CSIQ).

FSLR has tacked on 7.5% to trade at $64.31, bringing its year-to-date gains to 44.2%. In fact, the shares earlier touched an annual high of $66.35. Option traders have responded, too, with intraday call volume quadrupling normal amounts.

According to Trade-Alert, the December 65 and January 2016 67.50-strike calls are FSLR's most active options. Buy-to-open activity is detected at both strikes, suggesting these traders expect additional upside through the respective expiration dates, at the close this Friday, Dec. 18, and Friday, Jan. 15. Even if the calls expire out of the money, the most the buyers stand to lose is the initial premium paid.

Given the stock's technical achievements, it should come as little surprise that option bulls have been busy in recent weeks. Across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have bought to open nearly three First Solar, Inc. calls for every put during the past 10 sessions. The corresponding call/put volume ratio of 2.82 ranks in the 86th percentile of its annual range.

Shifting to CSIQ, the stock is up almost 5.6% at $26.82, and year-to-date, it's almost 11% higher. Currently, the shares are exploring territory not charted since August, prior to an earnings-related bear gap.

In today's options pits, calls are flying off the shelves at five times the usual intraday pace. In the lead are the December 24.50 and 26 calls, where traders may be purchasing new positions in the hopes of extended upside through week's end. This is par for the course. CSIQ's 50-day ISE/CBOE/PHLX call/put volume ratio of 2.97 stands above four-fifths of similar readings taken in the prior year.

Analysts are also extremely bullish toward Canadian Solar Inc. In fact, 100% of covering brokerage firms consider the shares worthy of a "strong buy" endorsement, while the stock's consensus 12-month price target of $34.38 stands at a 28% premium to current levels.

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