Finisar Stock's Apple Surge Draws Rare Batch of Options Bulls

Finisar develops chips for the iPhone X

Dec 13, 2017 at 11:37 AM
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Options volume has exploded on Finisar Corporation (NASDAQ:FNSR), with more than 45,000 contracts traded. This is 15 times what's typically seen at this point in the day, and a new 12-month high. At last check, FNSR stock was up 29.2% to trade at $24.93 on news Apple (AAPL) has invested $390 million into the fiber optics name -- which makes chips for the iPhone X, including those for facial recognition technology -- and options traders are betting on even bigger gains.

Most of the day's options trading so far has happened on the call side, with 33,918 calls exchanged versus 10,356 puts. It looks like speculators may be purchasing new positions at the December 25 call, as well as the January 2018 25- and 26-strike calls. If this is the case, the goal is for FNSR to extend today rally through the respective expiration dates of this Friday's close and the close on Friday, Jan. 19.

More broadly speaking, Finisar options traders have been busy buying puts over calls in recent months. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 50-day put/call volume ratio of 1.04 ranks in the 89th annual percentile.

As such -- and given FNSR's longer-term technical troubles -- it's possible that today's call buying at the out-of-the-money strikes is a result of short sellers hedging against any more Apple-induced upside. Short interest has doubled since mid-June to 13.72 million shares, the most since October 2014.

Regardless of the reason, now is a prime time to buy premium on near-term FNSR options. The stock's Schaeffer's Volatility Index (SVI) of 41% ranks in the 10th annual percentile, indicating low volatility expectations are being priced in.

Heading into today's trading, Finisar stock had been stuck trading in a channel of lower highs and lows since July, and was staring at a roughly 57% year-to-date deficit. Plus, the shares hit an annual low of $17.20 on Dec. 6. Today's pop has the tech stock on pace to close north of its 200-day moving average -- a trendline that quickly halted rally attempts in June and July -- for the first time since March 31.


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