$FSLR shines again on bullish traders

A highly bullish option strategy turned huge profits today as First Solar reached new highs.

Back on June 6, Investitute’s tracking systems detected the purchase of 10,000 September $40 calls for $2.65 and the sale of 10,000 September $30 puts for $0.85 with volume well above open interest in both strikes, showing that this was new positioning. The net cost of the trade was $1.80 with shares at $37.42.

Today those calls sold for $11.10 while the puts expired worthless, gaining more than six times the cost of the initial trade. The strategy illustrates the type of leverage that can be achieved through options. It was the second winning trade of this kind in First Solar’s September options posted on Investitute.

Such combination trades are particularly bullish because a rally boosts the price of the long calls while decreasing the value of the puts that were sold. Calls lock in the price where the stock can be purchased, gaining with a rally and providing leverage to the underlying shares with limited risk. Puts do just the opposite and increase when a stock drops, as traders use them either as an outright bearish bet or a hedge on a long position.

FSLR jumped 4.17 percent to close at $50.45 today. The stock climbed to a 52-week high of $51.84 this morning after Deutsche Bank upgraded the solar-power company to “buy” from “hold” and raised its price target on the name to $65 from $50.