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Trade the First Solar, Inc. (FSLR) Stock Downgrade With Aplomb!

Don’t be neutral, buy FSLR stock with a smart-looking spread

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FSLR Stock Modified Collar Strategy

Considering the overall bullish view for FSLR stock, I like the idea of approaching shares with a modified fence strategy. The irony here is there’s nothing new under the sun as I discussed this same opportunity this past Monday as part of a gallery article on solar plays.

With First Solar shares closing at $34.96, buying the July $40/$42.50 bull call spread while selling the July $32.50/$30 bull put spread is priced for a mid-market credit of roughly 30 cents.

What’s that get the trader? From $32.50 to $40 at expiration the full credit is captured. That’s nice, but the real heat is above $40. Above the purchased call strike the trader is holding a bullish vertical worth up to $2.80 above $42.50.

And what about the downside? This modified fence combination maintains a breakeven of $32.20 and risk is kept to a max of $2.20 below $30, should FSLR’s bullish earnings reaction price gap get filled.

I don’t know about you but that sounds like more of a reason to consider buying shares at a discount, though Baird & Co. might digress.

Investment accounts under Christopher Tyler’s management do not currently own positions in any of the securities or their derivatives mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT.

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