Now that April monthly options have expired attention will be directed to first quarter earnings reports that began last week and will now accelerate, and we have a new earnings trade idea for First Solar, Inc.?(FLSR).
Earnings Idea
First Solar, Inc. (FSLR) down 1.04 or -1.72 for the week and now right on support at 60 with 1Q earning report scheduled 4-28 after the close. The consensus estimate is .87 with revenues of 856 million. Since earnings are very lumpy depending upon quarterly revenue recognition the stock price often gaps, while implied volatility remains high.
Consider this idea for a company previously featured, but not for a long time.
The current Historical Volatility is 32.57 and 28.96 using the Parkinson’s range method, with an Implied Volatility Index Mean of 51.82 down from 55.21 the week before. The 52-week high was 75.71 on February 12, while the low was 29.69 on May 22, 2015. The implied volatility/historical volatility ratio using the range method is 1.79 so option prices are expensive relative to the recent movement of the stock. Friday?s option volume was 10,938 contracts with the 5-day average of 7,660 contracts with reasonable bid/offer spreads.
Using the ask price for the buy and mid for the sell the call spread debit would be .85 about 34% of the distance between the strike prices with a slight implied volatility edge. After the credit for the put sale at the bid price, the net credit would be 1.73. Use a close back below 55 as the SU (stop/unwind).
The spread suggestion above is based on the ask price for the buy and middle price for the sell presuming some price improvement is possible. The put sale reflects the bid price. Monday?s option prices will be somewhat different due to the time decay over the weekend and any price change.