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Cautiously optimistic on Finisar

By: optionMONSTER
Posted: 9/22/2011 7:59:00 AM
Referenced Stocks: FNSR

Finisar has been trying to rally, and one investor is looking for more upside.

optionMONSTER's Heat Seeker monitoring program detected the purchase of about 3,000 November 24 calls for $1.225 and the sale of an equal number of October 17 puts for about $0.30. Volume was more than 14 times open interest in both strikes.

The trade cost $0.925 and is similar to owning shares in the optical-networking company, profiting to the upside and losing money to the downside. The unusual characteristic was the use of different expiration months. That exposes them to losses only over the next four weeks, while giving them twice as much time to make money if there's a rally.

The fact that they chose not to sell longer-dated puts reflects fear about a potential selloff in the market, which could be especially painful for anyone short volatility. See our Education Section for more.

FNSR fell 7.77 percent to $20.19 yesterday as the S&P 500 pushed lower. Shares are up more than 30 percent in the last month, helped along the way by a strong earnings report on Sept. 2. The stock had traded above $40 earlier in the year.

Overall options volume was 5 times greater than average in the session.