Making money with FSLR is fun. You can wait until the stock gets around the $122 - $127 range and buy. If it goes lower, particularly into the $105 - $110 range, just buy some more. And wait. That has worked a minimum of eight times in 2010. Scoop up the stock in the first range, and sell into some strength. Or wait for a further decline, buy again (miniature little dollar cost averaging) and no problem, instant cash. If you just followed this little strategy in 2010 you could have beat every professional money manager out there and maybe paid off the house, too.
In all fairness, I should mention that I tend to sell way to soon. A lot of my gains that are around 10% or 14% could have easily been 20% returns. The great thing about the stock market is you decide when to lock in a profit, assuming you have one.
It's not that hard with FSLR, at least not this year. Now for the other end of the spectrum. I haven't shorted FSLR that much. In three plus years of trading this stock I have only shorted the company a few times. One of those was a substantial loss, but for the most part shorting at the $132 - $137 level tends to work out. The key here is that I would not double up on the short position. If the short does not work out, then it's time to bail and take the loss.
Right now I'm putting on a small transaction with FSLR. Despite it's weakness I have gotten into the stock at just above $138 and at the same time executed a buy on some FSLR put options. Specifically, the purchase was for the FSLR Nov 135 Puts, same ratio quantity to the shares (15 put options versus 1500 shares) for $7.35 ($735) per put.
Now let's see how this breaks out...
If First Solar goes on a run back to $150, then the value of the stock will increase by $12. While that profit gets locked, the FSLR Nov 135 Puts will still have a good time and volatility value mix, which I will sell back into the market. For instance, the FSLR Nov 125 Puts (which are right now $12 out of the money) are selling around $3.95 ($395) per contract. So with no intrinsic value, there is still a very good value in these puts. Assuming a run in FSLR up to $150, which would get the FSLR Nov 135 Puts out of the money by $12, the value of the puts could be sold for at least 50% of the $735 I laid out for them. Now, that may not be entirely correct, because if the move to $150 takes a couple weeks, then more time value will come out of these contracts. But the point remains, I can take part in the move upward and take back a good portion of the hedge.
On the flip side, if First Solar moves down sharply, then the FSLR Nov 135 Puts will take on an intrinsic value, plus the time value and volatility value (although reduced). For comparison sake, the FSLR Nov 145 Puts are currently trading for $13.40 ($1340) per contract. So a decline in the stock price will not prevent a loss, but it will certainly dampen it. As a bonus, if the stock declines with any degree of rapidity, there will be some more volatility that will come into the in-the-money puts. Also, I would "leg out" of the position, by selling the stock and then seeing if I could take the puts for a little bit more of ride downward.
FSLR is a great stock. The company is well run, the fundamentals are solid. The interest is there within the institutions and the trading public. It's incredibly liquid. The key to FSLR is to not sit still. Just like so much of the market these days, no one is buying and holding. Take the position and trade out of that position. That position might be for a few hours, a week or a couple months, but do not plan just to sit with it.
FSLR has been declining in recent days, it might be a good idea to buy on the open and try to take $2 as a scalp within the first three hours tomorrow. I'll walk away from that if the market, or First Solar, shows any sign of weakness on the open. I'll keep up tabs here on the "buy stock / buy put" trade in the coming days.
