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VIDEOBears Maul Infosys?
Ursines take advantage of the implied volatility skew.
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Shares of Infosys (INFY) have pulled back from recent highs, and traders today are looking for a further drop with bearish options.
Infosys is down 2.55% to $28.32 this morning after climbing as high as $30 on Thursday when it gapped up from $27. The India-based technology outsourcing leader has followed a steady uptrend from the lows around $22.50 from a month ago.
Optionmonster's Heat Seeker tracking system shows 2 large trades, starting with the buying of 5,000 of the April 27.50 puts for $1.30. This trade was made against open interest of 3,875 contracts and a 20-day average total options volume of 4,305. Seconds later, there was a sale of 10,000 of the April 25 puts for $0.50. This was less than the open interest at this strike of 15,616 contracts.
This could be a couple of different things, including someone rolling up the lower-strike puts to the those nearer to the stock price so they have a better chance of profiting. Or it could be a bearish ratio spread, looking for the stock to fall to 25, but not much further. Either way, it is definitely bearish and looking to take advantage of the implied volatility skew. (See optionMONSTER's Education section).
The implied volatility of the April 27.50 puts is 78%; for the April 25 puts, it's 88%. The historical volatility is at 58%, up from 44% 2 months ago.
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