Trade Idea On Finisar (FNSR) Today

Finisar (FNSR) is indicated to open around 37% lower this morning after missing earnings guidance estimates.

In the Chat Room this morning we are discussing ways to take advantage of this and here is a quick summary of what I laid out in this morning's 'Morning Line-Up' newsletter about:

Similar to stocks like NVDA or JDSU and others, FNSR had a huge run-up this year already, on top of a tremendous run in 2010.  Stocks that move sharply on top of already good moves tend to correct sharply until they find some sort of equilibrium again.  Look at the chart of NVDA for an example. Today FNSR is getting the red-headed step-child treatment and opportunities will present themselves for traders.  
My preferred ways to trade these types of moves is to sell far out of the money calls no nearer than 3 months out and preferably 4+ months out.  

The key here is that volatility could spike today, making the options nice and juicy to sell.  Stops have to be set clearly, but keep in mind that stocks with huge up or down-moves like FNSR is displaying today mean the previous trend has changed, at least for the time being.    

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