To add Jon's post, it all depends on the model of your switch and the manufacturer of the SFP.
Traditionally, it doesn't matter if the arm is down or up. You insert the SFP and you are SUPPOSE TO HEAR a very soft "click", which means the lock (or claws) has engaged the slot of the port.
Now I have noticed that legacy 2960/2960G, 3560/3560G, 3750/3750G do not play right. Whether you insert the SFP with the arm down or the arm up you will seldom hear the "click". The only way to fully determine if the lock has "bitten" to the slot is to (arm up) is to pull the SFP.
Just want to warn you about SFP with a plastic arm. Just try not to use it. The plastic arms become very brittle after prolong use. When you want to remove the SFP, those plastic arms will break off and leaving your SFP stuck in the port. You'll need a small flathead s_crew driver to push the lock underneath the SFP FORWARD before you can pull the SFP out.
As of lately I have RMA-ed these infernal and confounded plastic arm SFP in excess of 80 pieces (used or even brand new). No need to worry about the new DOM ones. They come in with metal arm but the very minute I catch these SFP with plastic arms ...
