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Trade of the Day: Finisar (FNSR)

Covered calls are a safe and easy way to generate steady income each month

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One of the white-hot sectors that emerged from 2013 was the fiber optic component and equipment sector, which sells to the major telecoms like Verizon (VZ), AT&T (T) and overseas networks. There has been a new wave of capital spending from these companies as demand for Internet traffic and the bundling of phone and television services is overwhelming the current infrastructure.

Finisar (FNSR) provides optical subsystems and components for data communication and telecom applications in the United States and internationally, including in Malaysia and in China. The company’s optical subsystems primarily consist of transmitters, receivers, transceivers, transponders, and active optical cables that provide optical-electrical or optoelectronic interface for interconnecting the electronic equipment used in building communication networks, including the switches, routers, and servers used in wire-line networks.

An initial selloff related to bum earnings from Cisco (CSCO) was short-lived, and the stock is showing good resilience going into its earnings report March 6. The company has a history of positive earnings surprises, and estimates have stayed steady at 44 cents per share for months.

To smartly position yourself to capture the short-term jump in FNSR, I recommend a short-term covered call.


For every 100 shares of FNSR you own or purchase at market, place a limit order to sell to open the FNSR Mar. $25 calls at $0.65 or more per contract, good till canceled. These orders should be filled immediately based upon Wednesday’s closing price.

The goal here is to collect a premium of $65 or more for every option contract that you sell against your FNSR shares and for FNSR to trade above the $25 call option strike at expiration on March 22.

If that happens, a buyer will pay you the agreed-upon $25 price for the shares that you bought today for roughly $23.75, plus you get to keep the $65-plus from each option contract. That works out to a sale price of $25.65 for a net return of 8% in a little over three weeks.

And what happens if FNSR isn’t trading above the $25 strike price at expiration? We still get to keep the $65 options premium for each contract we wrote and our shares. I’ll then recommend writing another round of calls against the shares for April to keep collecting income until our shares are called away. Either way, it’s a win/win.

The simplicity of short-term covered calls is what gave my Cash Machine Trader members an 8.22% return in Micron Technology (MU) in just five weeks and an 7.32% return in Boston Scientific (BX) in about six weeks with little effort or risk.

And I’ve just released a new list of recommendations to get Cash Machine Traders multiple payouts for steady income like that on March 22.

You can join us today to start collecting a steady stream of non-stop trading income.  Discover how to build your own “perpetual cash machine,” with conservative trading strategies that are easy to use…consistently successful…and remarkably repeatable, month after month, year after year.  Get the full story here.



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