Unusual Options Activity: First Solar (FSLR)

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  • Alternative energy play First Solar (FSLR) has generally been trending up, although shares recently saw a strong pullback. One trader is betting that the drop is temporary, and shares will trend higher.

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  • That’s the logic behind the surge in the December $92.50 calls. Expiring in 29 days, the calls will move in-the-money on a 14 percent rise in shares. Over 8,760 contracts traded, a 25-fold rise in volume from the prior interest near 350.

    The buyer of the calls paid about $1.38, or $138 per contract. Solar stocks were seen as a winning sector based on the presidential election, but shares of First Solar have been in a long-term rally for months.

    Currently, the share price has shown a strong level of strength around $80, where buyers are willing to come in and send shares higher.

    Action to take: Given the $80 floor that traders have under shares right now, and a current price near $83, a bullish rebound trade on shares makes sense here. Traders can follow into this trade, looking for high-double-digit gains if shares move higher in the coming weeks.

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  • Given how close this option is until expiration, there’s a chance that traders will lose out entirely on this trade if shares don’t rally far enough. That’s why traders should look for a quick profit before moving on to another trade. Traders who like the long-term trend may want to look at an option going out to March.