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First Solar, Inc. Message Board

  • halevay halevay Dec 23, 2012 5:30 PM Flag

    Better way to play FSLR - write options

    Some say FSLR will backtrack to $26. Others think it'll continue higher.
    I don't really care if it doesn't move at all.

    Look at selling the March $33 calls. You can get $3. So if the stock goes to $26, you cover 60% of your loss. If the stock goes up, you are covered up until $36/share. Plus, the $3 is a 10% return for 3 months (or 40% annualized) with the ability for a total possible gain of 16% (or 64% annualized).

    Certainly beats waiting on each day's trading.

    SortNewest  |  Oldest  |  Most Replied Expand all replies
    • I have no more upside on the stock, but that's ok. If this stock continues to move up, I realize my full profit. If not, I have some downside built in.

    • How much selling of calls have you done - If you sell naked, march calls if it closes at 10 you pocket the 3$ and your done.

      Sentiment: Buy

      • 1 Reply to harpf
      • Writing calls is a pretty large percentage of my portfolio.
        As to your suggestion about writing naked options:
        That would imply I was bearish on the stock, which I am not. And writing naked options means taking on risk I am simply not prepared to take. Being long the underlying stock protects me if the stock should suddenly increase substantially in value.
        There are only two things I do naked....shower and make sweet love. With options, I prefer to be covered.
        Happy holidays.

    • What happens if the stock goes to 14 and trades between 12 and 20 for the next 24 months?
      You would have a huge loss or you would need to sell more options just to try to get even.

      Speculation = Speculation

      It does not matter how you slice it.

      • 1 Reply to orenbcs
      • That's why my post was titled "better" way to play.
        If the stock goes to $14, then you are down $17 minus the $3 premium you took in, which is $3 better than you'd be if you didn't write the calls.
        If anyone wants to hedge as well, they could purchase 20 March $21 puts for a net trade of $1.20....then if the stock goes to $12, they'd essentially break even (down $19 on the stock and up $9 on the option x2, plus the $1.20 for the options trade).
        I don't consider buying stock to be speculation. I buy options for speculation. I buy stock as an investment. I don't believe we are headed below $20. If we go to $25, then I'll figure out my next option move then.

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