Options Corner: Why First Solar Can Trump The "Beautiful" Blow To Clean Energy

Renewable energy specialists like First Solar Inc FSLR are feeling the heat following President Donald Trump signing a tax and spending bill, known as the "Big Beautiful Bill." Unfortunately, enterprises associated with clean energy — particularly solar-related companies — don't view the law quite as favorably. On Tuesday afternoon, FSLR stock found itself down more than 5%, with the bulls struggling to find a floor. Still, there could be a high-risk opportunity in the malaise.

Granted, the situation doesn't look at all pleasant for First Solar — let's just keep it on the real here. Late Monday, Trump signed an executive order to fast-track the end of clean-electricity tax credits for solar and wind projects. This mandate eliminates the credits within 45 days after the "beautiful" bill goes into effect, likely before the end of 2025.

Notably, the executive order reiterated Trump's opposition to providing subsidies for what he calls "expensive and unreliable" energy sources like solar and wind. True to form, the aforementioned bill also effectively eliminates the $7,500 tax credit for new, U.S.-made electric vehicles. In essence, the president is going after the foundation of green policies, instead relying on hydrocarbons and nuclear power to meet U.S. energy needs.

As inauspicious as circumstances are for FSLR stock, there's also a case to be made that First Solar is the best house on the worst block. To be sure, Trump's attack on green energy represents a clear headwind. At the same time, First Solar is primarily focused on utility-scale projects, which by nature are larger, longer-term contracts.

It's also worth pointing out that among the largest solar manufacturers, First Solar is the only entity headquartered in the U.S. In addition, the company does not have any manufacturing facilities in China. Should tariffs and tensions ratchet up again, First Solar may benefit from pricing power protection.

Narrowing Down A Strategy For First Solar

While investors can pore over newspaper clippings and absorb soundbites, these activities don't provide any specific guidance for options traders. It's here that market participants with a short-term focus look at the charts for potential clues or patterns ala technical analysis. Unfortunately, it's difficult to distinguish between meaningful insights and apophenia.

To uncover the existence of exploitable patterns, we must first strip all the random, "analog" noise that price action generates and get down to root sources, essentially answering this question: was the market a net buyer or net seller? By converting price action into market breadth — or sequences of accumulative and distributive sessions — noise price fluctuations become digital codes.

Now, here's where the science part comes in. If the market was truly random, then the probability of upside would hover around 50%, no matter what time interval or sentiment regime we focused on. For instance, the odds of a coin toss flipped on Monday would have the same probability (assuming identical conditions) as one flipped on Friday.

The above thought experiment comes to an obvious conclusion: we all know that coin tosses are random. However, FSLR stock is a different animal.

In the trailing two months, the price action of FSLR can be characterized as a "6-4-U" sequence: six up weeks, four down weeks, with a positive trajectory across the 10-week period. Again, if the market were truly random, then any other 10-week sequence — 5-5-D, 7-3-U, 4-6-D, whatever — would feature roughly the same forward probability ratio.

That's not what we see at all. In the case of the 6-4-U sequence, in 60.71% of cases, the following week's price action results in upside, with a median return of 3.61%. Should the bulls maintain control of the market over the next three weeks, a push toward the $175 level could be in the cards.

Rolling The Dice On First Solar

Using the market intelligence above, the 172.50/175 bull call spread expiring July 25 appears enticing. This transaction involves buying the $172.50 call and simultaneously selling the $175 call, for a net debit paid of $125 (the most that can be lost in the trade). Should FSLR stock rise through the short strike price ($175) at expiration, the maximum reward is $125, a payout of 100%.

A word of caution is necessary. Based purely on past analogs, the statistical response to the 6-4-U sequence would put FSLR stock a bit shy of the $175 target by July 25. However, in my opinion, the "Big Beautiful Bill" represents an extraordinary event. As such, I would anticipate a not-so-ordinary response. It's speculation, admittedly, but it's backed by a reasonable assumption.

Further, as a baseline, the statistical chance that FSLR stock will rise on any given week is only 51.61%. With the flashing of the 6-4-U sequence providing better odds, an incentive exists for a debit-based bullish strategy. Combined with the prospect of investors perceiving First Solar's red ink as an opportunity, FSLR seems compelling right now.

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