First Solar announces earnings tonight after the close. It has the familiar implied volatility skew, where the May calls have an implied volatility of 85% and the September options have an IV of 67%. This is a nice potential 18 point move in the volatility. The 155 May straddle sells for $22.40.
To get an idea of what size move the $22.40 will cover, I calculate the one day standard deviation of price moves for FSLR. That is, how much does FSLR move over the last 20 trading days by taking the one day historic volatility and multiplying by the price. So 68% of FSLR’s one day price changes should be within $4.21 of the daily price.
So the $22.40 covers that almost five times. So it will cover a 5 standard deviation move. Pretty good.
Now let’s look at previous earnings announcements. How much did FSLR move on those days? Here is a table of price moves on earnings days and the day after:
| Date | Open | High | Low | Close | Volume | Price Change | 1 Day Vol | 1 SD Price Change | Spike |
| 2/24/2009 | 127.39 | 137.93 | 124.89 | 137.68 | 6269200 | 12.84 | 0.04 | $5.76 | 2.91 |
| 2/25/2009 | 115.77 | 117.38 | 105.1 | 107.65 | 14161400 | -30.03 | 0.07 | $7.29 | -5.21 |
| 10/29/2008 | 116.49 | 131.58 | 111.8 | 115.75 | 7053200 | 1.66 | 0.10 | $11.02 | 0.15 |
| 10/30/2008 | 134.43 | 144.07 | 131 | 144.07 | 8104100 | 28.32 | 0.11 | $15.39 | 2.57 |
| 7/30/2008 | 279 | 286 | 271 | 285 | 4380700 | 7.43 | 0.03 | $9.59 | 0.80 |
| 7/31/2008 | 297.59 | 301.3 | 284.18 | 285.03 | 5158000 | 0.03 | 0.03 | $7.63 | 0.00 |
| 4/30/2008 | 297.57 | 307.8 | 286.14 | 291.99 | 13397600 | 7.07 | 0.03 | $9.09 | 0.77 |
| 5/1/2008 | 285 | 285.2 | 261.12 | 263.35 | 7947900 | -28.64 | 0.04 | $10.39 | -3.15 |
| 2/13/2008 | 214.57 | 228.5 | 207.5 | 228.46 | 17867200 | 52.9 | 0.09 | $19.49 | 4.68 |
| 2/14/2008 | 231.51 | 236.57 | 221.5 | 224.11 | 9085200 | -4.35 | 0.08 | $18.36 | -0.22 |
| 11/7/2007 | 170.51 | 173.94 | 160.91 | 167.12 | 5763300 | -1.88 | 0.05 | $7.81 | -0.24 |
| 11/8/2007 | 221.19 | 230 | 205.87 | 224.43 | 11605600 | 57.31 | 0.08 | $17.06 | 7.34 |
| 7/31/2007 | 122.99 | 123.21 | 106 | 112.57 | 4008900 | -7.71 | 0.06 | $6.39 | -1.17 |
| 8/1/2007 | 102.87 | 111.42 | 101.36 | 107.5 | 5270300 | -5.07 | 0.06 | $6.21 | -0.79 |
| 5/3/2007 | 59.28 | 59.62 | 57.1 | 57.95 | 1998500 | -0.95 | 0.04 | $2.13 | -0.44 |
| 5/4/2007 | 61.54 | 67.5 | 61.48 | 66.7 | 6099600 | 8.75 | 0.05 | $3.17 | 4.11 |
| 2/13/2007 | 33.52 | 34.74 | 33 | 34.28 | 1109700 | 1.18 | 0.03 | $0.96 | 1.30 |
| 2/14/2007 | 40.38 | 44.85 | 40.01 | 43.72 | 5903700 | 9.44 | 0.06 | $2.54 | 9.86 |
Looking at the last column, FSLR moves more than 5 standard deviations during most of the earnings announcements.
I think Green Mountain Coffee Roasters (GMCR) is a better bet tonight.
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