Bulls Look for Bounce in Finisar

By Chris McKhann , analyst at OptionMonster

NEW YORK -- Finisar (FNSR) has been a dog in recent months, but one investor is holding out hope for a rebound.

OptionMonster's tracking programs detected the purchase of more than 9,000 May 15 calls against previous open interest of just 64 contracts. Larger institution-sized blocks were snapped up in the course of a couple of minutes, with premiums going from 45 cents to 55 cents.

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 fell 4.08% Tuesday 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, and 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.

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.