Options Intelligence Report: CBOE Vix Index (VIX) & First Solar, Inc. (FSLR)

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VIX ñ CBOE Vix Index
Bulls And Bears Fight Over Volatility Direction

With the equity market down and the dollar on the rise, investors across different asset classes today appear to be blaming one another for prevailing direction. No one seems to know why anything is moving in the fashion it is. The suggestion of course is that risk appetite is on the demise and fear is picking up. Compounding such indecision in the volatility class are trades suggesting ongoing disparate views on the fortunes for equities going forward. The so-called fear gauge is 5% higher at 24.90 today while trading has been two way.

In the November options one investor loaded up on 25,000 call options at a 25 cent premium suggesting that the index will be above 25 when options expire next Tuesday. The December contract equally hinted at more volatility ahead as one traded bought the 27.5/35 call spread 25,000 times at a net 93 cents. In order for this trade to break even next month the Vix index would need to settle above 28.43. Arguing the bullish case another investor bought 15,000 put options at the December 20 strike, which suggests that volatility will subside into year end rally for equities.

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FSLR ñ First Solar, Inc.

Bullish options activity appeared in the November contract despite the 2.5% decline in shares of the semiconductor company today to $116.98. A bull call spread on FSLR suggests one investor doubts shares will continue much lower. The trader purchased approximately 2,300 calls at the in-the-money November 115 strike for 4.75 each, spread against the sale of roughly the same number of calls at the higher November 120 strike for 2.44 apiece. The net cost of the transaction amounts to 2.31 per contract.

Shares must recover through $117.31 in order for the contrarian trader to breakeven by expiration next Friday. Maximum potential profits of 2.69 per share are available to the call spreader if the stock rebounds up to $120.00. We note that FSLR traded as high as $120.14 during yesterdayís trading session. 

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