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Traders Turn Bullish on Networking

By Mike Yamamoto of  OptionMonster

NEW YORK -- Option traders turned bullish on networking companies Tuesday, piling into Ciena (CIEN) , Finisar (FNSR) and JDS Uniphase (JDSU)

OptionMonster's tracking systems show that the action began early in Ciena, which eventually saw more than 8,000 October 23 calls trade in a strong buying pattern for 40 cents to 62 cents by the end of the session. The volume was far above the strike's previous open interest of 1,687, indicating that new positions were established.

 Then in the afternoon, more than 6,000 October 23 calls in Finisar were purchased for 50 cents to 60 cents against previous open interest of just 112 contracts, following bullish action in the September 20 calls last week. A few minutes later, about 5,500 October 30 calls were bought in JDS Uniphase for 18 cents to 23 cents, dwarfing open interest of a mere 11 contracts in that strike. 

These long calls lock in the price where the stocks can be purchased through mid-October no matter how far they might climb. They could be sold earlier at a profit if premiums rise with a rally before then, providing potentially significant leverage, but the contracts will expire worthless if shares pull back. 

CIEN gained 4.06% to $20.74 on Tuesday, ahead of its next earnings report on Sept. 4. FNSR rose 3.07% to close at $20.67, while JDSU was up 2.62% to $11.94. 

Total option volume was well above average in the three names, and all showed highly bullish call/put ratios. Ciena calls eclipsed puts by 5 to 1; Finisar calls outnumbered puts by 20 to 1; and JDS Uniphase calls outpaced puts by 22 to 1.

 Yamamoto has no positions in CIEN, FNSR, or JDSU.


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.

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