Are you sure that you have enough of a handle on the end of that clip in order to use transition?
Also, if all you want to do is fade out, and you’re having trouble with it, then you can try keyframing the opacity. By keyframing the opacity from 100 to 0 over the course of 1 second, that’s the same as a fade out.
To do that, put your playhead on the location in the timeline where you would like the fade out to begin, then double click on the clip in your timeline in order to open it up in the viewer. In the viewer, select the “Motion” tab, twirl down the opacity options, and then click on the rhombus button just to the right of the opacity slider. That sets the first keyframe (you’re telling Final Cut: “I want the opacity at this point in time to be 100%”). Then go back to the timeline, move your playhead to the end of the clip that you would like to have faded out. The position of the playhead in the timeline should be automatically updated in the viewer (i.e. by moving the playhead in the timeline, it moved the playhead for the corresponding clip in the viewer). Once you have the playhead at the end of the clip, then just go back into the viewer and drag the opacity slider from 100% down to 0%. Since you’re changing the setting, Final Cut Pro automatically sets a second keyframe at that point in time (this time you’re telling Final Cut: “I want this video to have 0% opacity at this point in time”). Final Cut, like all other video/audio applications, will “interpolate” between the two keyframes, meaning that it will gradually decrease the opacity from 100% to 0%, creating a fade-out effect.
I hope that helps. Best of luck to you!
– Glenn Fisher