FSLR: Close, but no Cigar

The top two earnings trade candidates today are FSLR & V.  Only one has a solid IV differential…FSLR.  There is a problem with FSLR, which is the fact it is hard to borrow (HTB). This results in liquidity issues, and we are not comfortable trading FSLR into earnings as a results. 

V is easy to borrow (ETB), but does not have enough IV differential to attract us.

If we absolutely had to place an earnings trade today, we would go with FSLR. IV is 175% on the Nov1 weekly options vs 80% hist IV, making it just over 2x IV differential. The expected move is approx 2.65, giving it an expected move range of 21.40 - 26.70. 

The undefined risk strategy we would consider would be selling to open FSLR Nov1 20/27.50 Strangle @ 0.58 credit, which would put us approx 1.6x outside the expected move with a credit that is just over 2% the price of the stock. You can move up to the 28 Call to give a little extra upside cushion and still get a reasonable credit of 0.50.

The defined risk strategy we would consider would be selling to open FSLR Nov1 23/24 Put Spread @ 0.44 credit. FSLR has been trending higher into this earnings event, and recently managed to break short term down trend resistance as well as 200 day moving average resistance. This bullish price action into the earnings event would give us reason to position bullish into the earnings report with this low capital risk strategy.

Hopefully tomorrow will bring a name that meets our strict criteria, but for today we are staying disciplined and sitting the sidelines.