Wednesday, January 2, 2013

First Solar (FSLR) - Vol Nears Annual Low; Would you rather own or be short vega starting today?

FSLR is trading $31.79, up 3.0% with IV30™ down 12.2%. The LIVEVOL® Pro Summary is below.


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First Solar, Inc. manufactures and sells solar modules with an advanced thin-film semiconductor technology, and it designs, constructs, and sells photovoltaic (PV) solar power systems. The Company is a thin-film PV solar module manufacturer and a PV solar module manufacturer.

I found this stock using a real-time custom scan. This one hunts for depressed vols. I know we just came to a "sort of" Fiscal Cliff deal, but I will be focusing on stocks that are nearing annual lows in vol this week with a simple question: "Would you rather own or be short vega starting today?"

Custom Scan Details
Stock Price GTE $5
IV30™ GTE 20
IV30™ Percentile LTE 10
Average Option Volume GTE 1,200

The goal with this scan is to identify short-term implied vol (IV30™) that is depressed to its own annual history (at most in the 10th percentile). I'm also looking for a reasonable amount of liquidity in the options (thus the minimum average option volume), and I want a minimum vol level so I don't pick up any boring ETF’s (or whatever). The stock price requirement helps me identify names that have enough strike prices to trade or spread.

The six-month FSLR Charts Tab is included (below). The top portion is the stock price the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).

On the stock side we can see a very nice stock appreciation over the last six months with the price going from $15.28 (7-2-2102) to now $31.79. An annual view does show a different story, with the sock price one year ago ($35.79) actually below the current price. The 52 wk range in stock price for FSLR is [$11.46, $50.20].

But, this is a vol note, so let's look at the IV30™ chart in isolation for one year, below.

We can see how the vol has collapsed off of earnings back in the Oct/Nov period and is now nearing an annual low. The 52 wk range in IV30™ for FSLR is [58.45%, 99.80%], putting the current level in the 6th percentile.

Finally, let's look to the Options Tab (below).

Across the top we can see the monthly vols are priced to 59.29% and 63.10% for Jan and Feb, respectively. The next earnings release should be after Feb expo, so neither expiry has that event. I'll just repeat myself from the beginning of this note: "Would you rather own or be short vega starting today?"

It's a fair and non-trivial question.

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