Schaeffer's Trading Floor Blog

Finisar Corporation (FNSR): Are Higher Highs Ahead?

The bearish sentiment levied toward FNSR may have bullish implications going forward

by 4/14/2014 10:59 AM
Stocks quoted in this article:

Similar to sector peer Cisco Systems, Inc. (NASDAQ:CSCO), put players have been active in Finisar Corporation's (NASDAQ:FNSR) options pits. During the past five sessions, more than 11 puts have been bought to open for each call at the International Securities Exchange (ISE) and Chicago Board Options Exchange (CBOE), resulting in a put/call volume ratio of 11.04.

Including data from the NASDAQ OMX PHLX (PHLX) -- and widening the time frame out to two weeks -- yields a similarly skeptical stance. In fact, FNSR's 10-day ISE/CBOE/PHLX put/call volume ratio of 1.94 ranks in the 96th percentile of its annual range, indicating puts have been bought to open over calls with more rapidity just 4% of the time within the past year.

This penchant for puts has translated into a front-month gamma-weighted Schaeffer's put/call open interest ratio (SOIR) of 1.91, which means that near-the-money put open interest in the soon-to-expire April series nearly doubles call open interest. What's notable about these accumulations of open interest at strikes near present trading levels is that they can potentially have more of an impact on the equity's short-term price action versus deeper out-of-the-money strikes.

Looking elsewhere reveals that this bearish bias toward FNSR isn't relegated to the options arena. Short interest jumped 11.2% during the latest reporting period, and now accounts for an impressive 17.4% of the stock's available float. This equates to 15.6 million FNSR shares sold short -- the loftiest amount since November 2010.

On the charts, however, Finisar's strong performance hasn't warranted this skepticism. Year-over-year, shares of FNSR have tacked on more than 78%, thanks to a lift from their rising 160-day moving average. What's more, a quick bounce off this trendline in mid-March helped send the stock to a two-year high of $28.07 just three weeks ago. Going forward, a capitulation from either group of option bears or short sellers amid this positive price action could translate into a contrarian boon for Finisar Corporation (NASDAQ:FNSR).


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