Wednesday, November 2, 2011

First Solar (FSLR) - Dropping Stock, Vol Diffs

FSLR is trading $48.43, up 3.5% with IV30™ down 1.5% as of ~11:15am EST. The LIVEVOL® Pro Summary is below.


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First Solar, Inc. (First Solar) manufactures and sells solar modules with an advanced thin-film semiconductor technology.

On 10-25-2011 (a week ago), the company dropped 25% from $57.95 to $43.27 ($14.68) on news that CEO Rob Gillette would be resigning effective immediately. Here’s a snippet from a Bloomberg article:

Gillette’s departure came as a surprise to analysts. “This abrupt move might be related to differing views on the long-term strategic direction for the company, in light of rapidly changing industry dynamics driven by slower-than-anticipated demand” and excess capacity, Sanjay Shrestha, an analyst at Lazard Capital Markets in New York, said in today in a research note.

Source: Bloomberg: First Solar Falls Most Ever After Chief Gillette Departs, Ahearn Named CEO, written by Ehren Goossens and Andrew Herndon

A day later the company popped ~$3 on the earnings release. Let’s turn to the Charts Tab (6 months), below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20 - blue vs HV180 - pink).

While the CEO announcement certainly hit the stock hard, we can see that over the last six months the trend has been to the downside – significantly. This was a $142 stock at the end of June, and is now down more than 65% from that high. The annual high is over $175, so, in English, the stock movement has been brutal for shareholders.

On the vol side we can see the implied spiked into earnings and has since fallen back down a bit. The IV30™ right now is in between the short-term and long-term historical realized vols.

Let’s turn to the Skew Tab.

Note that the red curve is the Nov 4 (weekly options – i.e. expiring in 2.5 trading days). We can see that for the three expirations charted, the term structures are monotonically increasing to the shorter expos. It’s this vol difference that caught my attention.

Finally, let’s turn to the Options tab for completeness.

I wrote about this one for (OptionsProfits), so no specific trade analysis here.  I will say that while the juice overall is expensive, this stock does move.  Funding a vol purchase in the back with something interesting the front, diagonal or otherwise maybe even on ratios, does seem like an interesting position to analyze.

This is trade analysis, not a recommendation.

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