FNSR Analysis

Finisar Corp. (FNSR)

Update 1/21/2017: Options remaining in my FNSR position expired today after the position was disrupted by an exercise of short put options. The overall position was slightly unprofitable.

FNSR spiked prior to its earnings announcement and then declined just as rapidly before the market close. The company published earnings after the closing bell with earnings per share that exceeded the Street estimate by 54%.

Nevertheless, the shares drifted lower, and about midway through the lifespan of the position, the short puts were exercised, putting long shares in my account. I sold the long shares, sold the accompanying long put, and allowed the remaining bear call spread, which was well out of the money, to expire worthless for maximum profit.

Shares declined by 10.9% over 43 days, or a -93% annual rate. The options position produced a 1.1% loss on debit for a -9% annual rate.

I shall use the JAN series of options, which trades for the last time 43 days hence, on Jan. 20.

Implied volatility is 60%, which stands in the 88th percentile of its annual range. The price used for analysis was 33.75.

Iron fly, short the $35 calls and long the $38 calls,

short the $35 puts and long the $32 puts,

sold for a credit and expiring Jan. 21.

Probability of expiring out-of-the-money

JAN Strike OTM Δ
Upper 35 62.2% 45
Lower 35 37.8% 38

The premium is $2.40, which is 0.8% of the width of the position’s wings.

The risk/reward ratio is 0.3:1.

Decision for My Account

I have entered a position on FNSR as described above. The stock at the time of entry was priced at $33.67.

— Tim Bovee, Portland, Oregon, Dec. 8, 2016

4 thoughts on “FNSR Analysis

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