Ever since the rumors hit that Germany may cut solar subsidies by 15%, all solar stocks along with general market have fallen off a cliff. News from Germany may very well be legit, but I am not sure the extent of subsequent drop in solar names is warranted.
The attached daily First Solar chart shows very strong support right around $110-115 where it is trading at today. We have seen this level several times since Sept'09 and every time the stock has bounced from here. I think we can play for a bounce here on the long side.
I like selling the following Bull Put Spread:
- Buy to open Feb $100 strike puts
- Sell to open Feb $105 strike puts
The trade can be done for a net credit of $1.05 as I write this note. This provides 21% return by Feb expiration if the stock stays above $105. Notice you have 9% cushion on this trade to make 21% return, i.e. even if the direction of the stock continues downward, it can fall another 9% from here and you will still make money by Feb expiration. I like the odds.
Good luck!
