Buying A Call Option On First Solar (FSLR)

| February 27, 2015

Buying A Call Option On First Solar (FSLR)

Solar power can be an intriguing industry for investors. In some ways, it’s investing in technology. In other ways, it’s like buying a utility. The main thing to realize is we’re well past the days where solar power is developmental.

For the most part, the small players in solar technologies have either proven themselves or gone out of business by now. While there’s still plenty of experimental technology in solar energy, most public companies have gained traction with customers at this point.

On the other hand, solar power isn’t just about technology. In sunnier regions, it’s become a legitimate competitor to more traditional forms of energy production. Several massive solar panel farms are contributing large amounts of power to utilities.

In terms of utility-sized projects, there’s no company in the US bigger than First Solar (FSLR).

As solar power becomes more widely adopted, companies like FSLR stand to gain significantly. FSLR is already a $5 billion company with over $3 billion in annual revenues. Yet, the company could be in for so much more.

Currently, FSLR is trading at $56.73, up over 25% on the year. That’s 45% from the 52-week low of $39.18, and 24% from the 52-week high of $74.84.

So is now the time to buy a call option on FSLR?

As a reminder, a call option makes money when the underlying stock goes up. Is FSLR going to continue to climb?

For a more in-depth look at FSLR, you can check here.

Here’s the deal…

FSLR just made a major announcement that investors love. And, it could just be the start of a much bigger move higher.

You see, the company is going to combine assets with SunPower (SPWR) to create a new tradable investment vehicle. This new entity, called a YieldCo, is meant to provide steady dividends.

The YieldCo will earn revenues through generating or delivering energy, and distribute the proceeds through dividends. It’s basically an MLP for solar companies. The idea is to attract investors who want something more stable than a typical solar stock can provide.

As I mentioned earlier, investors were thrilled with the news. FSLR is up about 15% on the day.

call option buying opportunity, a chart of FSLR

As you can see from the chart, the stock skyrocketed on the news of the new YieldCo. The share price has climbed all the way to the 200-day moving average in a single day. If it breaks through the resistance, it could be off to the races.

Now could be a great time to invest in a longer-term FSLR call option.

FSLR has been a stalwart in the solar industry for quite a while. Nevertheless, the stock has been somewhat undervalued for some time (based on future earnings potential). The new YieldCo could really give the company the boost it needs.

As such, buying longer-term calls in FSLR makes sense. The September 60 calls are priced at around $6 right now. That’s not cheap, but not bad for an option with over 6 months to go to expiration and less than 10% from being in the money.

Yours in Profit,

Gordon Lewis
Options Trading Research

Note: Gordon Lewis has been trading options for more than 15 years and he now writes and edits for You can sign up for the newsletter and get a free research report. We are your go-to source for top notch options trading research.


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Category: Options Trading

About the Author ()

Gordon Lewis is the Chief Investment Strategist and editor for the popular daily newsletter – Options Trading Research. He’s also one of the key analysts behind the highly successful Options Trading Wire and Advanced Options Adviser. As a market maker on the floor of the CBOE, Gordon analyzed and traded stocks and options across a broad range of market caps and industries including retail, internet, oil, insurance, and telecom. He often traded thousands of options contracts per month… and it’s fair to say, Gordon’s analyzed and invested in some of the most complex and successful options strategies in the world.

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