Those calls lock in the price for shares in the company, which provides optical subsystems and components for networking technology. If they rally quickly, the options could provide major leverage to the move. But if the stock falls or moves sideways, the calls will probably expire worthless.
Finisar shares fell 4.08 percent yesterday to close at $14.58, returning to levels last seen in August. The stock was above $23 as recently as late February, but has been dropping steadily since then. It last closed above its 10-day moving average at the beginning of April.
In trader parlance, this call buyer is apparently trying to “catch a falling knife.” Not always the easiest trade, but the trader seems to believe that there’s sufficient reason to be bullish.
Calls outnumbered puts by more than 10 to 1 in the stock, a reflection of the session’s upside bias.
—McKhann has no positions in FNSR.
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Chris McKhann is an analyst and writer for OptionMonster.