First Solar Bucks the Trend
First Solar Bucks the Trend
On a day when I look at my own book and think ìanything long is wrongî here comes a name that has been taken to the woodshed over the last year, FSLR. It is hard to believe but FSLR was a $148.54 stock on April 11th last year which seems like another lifetime in our HFT cycle. Yet it was up on the day today as it came up on one of my screens as one of the few IT companies up 5% or more. But nonetheless there was a time when the solar industry was the Green Mac Daddy favorite of the current administration. Then came Solyndra, bankruptcy and an endless supply of cheap Chinese solar panels. FSLR is so hated it has 20+ million of its 59 million share float short.
A little heads up from the Option Pit Pro Chat was this gem:
I think this at least puts a wrinkle in the name which I believe will cause an uptick in realized volatility.
While I have a hard time calling the bottom or top in FSLR I made a quick check of the volatilities and pulled up the skew chart from LiveVol. Note below the big dip in the yellow skew curve from the April ordinary cycle. The ATM option is pretty much the cheapest series on the board. It also has the most gamma which is what I want. The off earnings cycle usually trades cheap but if some news comes out that is outside the earnings you get a nice chance to buy some relatively cheap juice.
livevol (r) www.livevolpro.com
All the current realized volatility is pretty low in FSLR (the implied is not) as the name has been a shorts paradise and I cannot disagree with it. The Apr is a decent high risk shot for a move. FSLR was trading $24 three days ago and half the float short could be a powerful engine.
The trade
As of this writing buying the 21 strangle in the Apr ordinary cycle looks best. Give it 3 or 4 days and if the story changes watch out. Allocate a bit less to this trade since the nature of decay here is totally vicious. If the story was not this interesting I would pass normally so close to expiration.
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Mark Sebastian is the Director of Eduction for Option Pit, and a former market maker on both the Chicago Board Options Exchange and the American Stock Exchange. He is co-host of "Option Block," the wildly popular show on The Options Insider Radio Network.
He has been published in nationally on Yahoo Finance, quoted in the Wall Street Journal is a featured contributor for TheStreet.com. He also writes regularly for SFO, and OptionsZone, and is the managing editor for Expiring Monthly: The Option Traders Journal.
To learn more about Option Pit and its mentoring services, please visit OptionPit.com
About Mark Sebastian
Mark Sebastian is a former market maker on both the Chicago Board Options Exchange and the American Stock Exchange. Along with his role directing the path of education for Option Pit, Mark is currently the director of risk for a private hedge fund. He writes a daily blog, the Option Pit blog, formerly Option911. Sebastian has been published nationally on Yahoo Finance, Google finance, Financial Times Alphaville and is a featured contributor for TheStreet.com. He is also published regularly at SFO, the Options Insider, and is one of the Co-Hosts of The Option Block Podcast, a featured Podcast from Options Insider Radio. Mark is the managing editor for Expiring Monthly: The Option Traders Journal. Sebastian has a Bachelor's in Science from Villanova University.
To learn more about Option Pit and their mentoring services, please visit: http://www.optionpit.com
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