First Solar, Inc. (FSLR) Put Options Pop

First Solar, Inc. (FSLR) is one of the worst-performing stocks of the year, relative to the S&P 500 Index (SPX)

Celeste Taylor
Aug 17, 2016 at 5:18 PM
facebook twitter linkedin


Solar energy stocks were in the limelight today, with JA Solar Holdings Co., Ltd. (ADR) (NASDAQ:JASO) moving lower after earnings, while Canadian Solar Inc. (NASDAQ:CSIQ) dropped ahead of tomorrow's report. From a longer-term perspective, the markets haven't been kind to solar stocks of late , and analysts at Trefis today opined that the "solar industry could be poised for some difficult quarters ahead," due to "weaker demand for solar panels and potential pricing headwinds." Against this backdrop, solar energy concern First Solar, Inc. (NASDAQ:FSLR) has been feeling the heat, and some options buyers are betting on lower lows.

FSLR has been one of the worst-performing stocks relative to the S&P 500 Index (SPX) in 2016. The stock has dropped 44% year-to-date, and has underperformed the greater SPX by nearly 46 percentage points. FSLR ended the day down 2.3% at $36.86, after touching a two-year low of $36.75. Just last week, the solar stock breached the round $40 level, which had acted as a level of support for the past few years. However, FSLR's 14-day Relative Strength Index of 25 is currently in "oversold" territory, so a short-term bounce isn't outside the realm of possibility.

FSLR 081716

As FSLR dropped, action in the option pits popped off, with put volume running at nearly twice the average daily rate. Roughly 14,000 contracts traded, with the October 32.50 put attracting the most attention, with some of the activity looking like the buy-to-open variety. This means option players are betting on First Solar, Inc. to fall below the $32.50 level -- which is territory not charted since early 2013 -- by the time of expiration on Oct. 21. 

However, today's appetite for FSLR puts marks a change of pace, with the equity's 50-day call/put volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) sitting at 1.90, in the 94th percentile of its annual range. In addition, FSLR's Schaeffer's put/call open interest ratio (SOIR) of 0.48 is lower than any other reading from the past 12 months, suggesting near-term option players haven't been more call-skewed in the last year.

Total open interest now stands at an annual high. First Solar, Inc.'s most popular front-month option is its deep out-of-the-money August 40 call, with over 8,200 contracts on the books. 

Some of this call buying could be short sellers hedging their bets, however, given that short interest in FSLR has increased by 39% over the last two reporting periods, now accounting for 16.2% of the stock's float. These shorted shares would take nearly eight days of trading to cover, at FSLR's average daily volume. 

Let us help you profit from market volatility. Target big gains in short order with a 30-day trial of Schaeffer's Weekly Volatility Trader!


A Schaeffer's exclusive!

The Expert's Guide

Access your FREE trading earnings guide for Q3 before it's too late!


  
 
Special Offers from Schaeffer's Trading Partners