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Finisar Option Players Bet on a Post-Earnings Plunge

Today's 6% stumble has FNSR bears circling

by 11/13/2012 12:11 PM
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Puts are flying off the shelves on Finisar Corporation (NASDAQ:FNSR - 11.49) in today's session. More than 7,750 put contracts have crossed the tape, representing 22 times the average intraday put volume. Meanwhile, fewer than 1,000 call contracts have changed hands.

Nearly all of today's put volume has centered on the December 11-strike put, which has seen north of 7,600 contracts trade. The majority of these have crossed at the ask price, implied volatility is 5.6 percentage points higher, and volume is easily outstripping open interest. Summing it all up, it appears new positions are being purchased here today. By buying these puts to open for a volume-weighted average price of $0.71, traders expect FNSR to slide 12% -- below the $10.29 mark (the strike minus the premium paid) -- through December expiration.

However, short-term speculators have displayed a preference for puts on FNSR of late, as evidenced by the stock's Schaeffer's put/call open interest ratio (SOIR). Specifically, the equity's SOIR of 0.85 ranks in the 87th percentile of its annual range, indicating near-term traders are more put-heavy than usual toward FNSR.

Given the stock's withstanding troubles on the charts, this put-skewed bias among option players isn't too surprising. The stock has shed roughly 41% of its value on a year-over-year basis, and around 31% in 2012 alone. Plus, the equity is down nearly 6% in today's trading on no apparent news. FNSR's most recent rally attempt was met with stern resistance from its 60-week moving average -- a trendline that has served as an overhead ceiling since June 2011.

Additionally, the communications equipment issue is tentatively scheduled to unveil its quarterly results the first week of December. The company has a mixed history in the earnings confessional, and has bested analysts' bottom-line expectations in three of the last four quarters. Wall Street is calling for a per-share profit of 14 cents per share, well below the 23 cents per share FNSR recorded in the same quarter of the previous fiscal year.


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