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January 3, 2013  Thu 12:20 PM CT

FSLR: SEE CHART GET CHAIN FIND STRATEGIES
Warren Buffett is famous for making people rich over the long haul, but today he's handing out fast money.

MidAmerican Energy, part of the billionaire's sprawling Berkshire Hathaway, agreed to pay $2 billion to $2.5 billion for two solar-generating stations in southern California. That's triggering a rally in solar-energy stocks, making it the best performer of any group tracked by our researchLAB tool.

But the fast money is really in another name, First Solar. Yesterday its Weekly 34.50 calls expiring this Friday traded for $0.05 and ended the session valued for just $0.01. Then when Buffett's news hit, FSLR shot higher by 10 percent to $35.25--but that was nothing compared with the calls, which gained 9,000 percent. (See chart below)

Ironically, the news wasn't even related to FSLR directly, but rival SunPower. MidAmerican's investment in the solar space is being interpreted as a vote of confidence in the solar-energy industry. SPWR doesn't normally trade a lot of options and doesn't have weekly contracts, so fast-money traders looked to FSLR.

Solars had been climbing even before Buffett made his move, and entered the session as the strongest group on researchLAB over the preceding month.

Total option volume in FSLR is twice the daily average so far today, with short-term weekly contracts dominating the activity.

Weeklies Chart
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Education & Strategy

Sweet Spot Exceptions

As discussed last week, when using the Stock Replacement Strategy to replace a stock position to trade direction, we want to use an option that has very similar characteristics to the stock. We talked about using the deep in-the-money, 80 to 85 delta option that is similar in the Greeks and has relatively little extrinsic value which tends to work against us in stock directional trading.

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