Infosys strangle/straddle – Q2 FY14

Infosys will kick start Q2 FY14 result season on 11th October this year as usual. In past several quarters, Infosys stock has moved violently one way or other on result day.

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If you end up on the right side you make it big otherwise, you lose it big. Since Q1’FY14 result on 12th July, Infy stock has moved up 7.6 percent. INR depreciation has obviously been the tailwind for all IT stocks and Infy has also benefited from it. But key trigger for IT stocks has been improving demand environment in key market,US.

Last quarter, Infy had heavy option buildup and IV’s were as high as 90-100. IT major options had built-in 20 percent stock movement on result day. Lot of people had bought strangle and straddle to benefit from sharp movement. But it turned out that Infy stock moved 10.91 percent and strangle/straddle buyers lost money. This time also option buildup has started in Infy. On put side maximum buildup is in 2500 and 2600 strikes whereas on call side maximum buildup is in 3100 and 3500 strikes. As of now, put side buildup is more than call side. Maybe because of the fact that in the past several quarters Infy has disappointed investors and a lot of expectations are built in with Narayan Murthy’s return in active role.

Last quarter looking at the IV’s, I had sold strangles. But this quarter I have not decided what to do in Infy options as of now. IV’s in Infy options this quarter are still low (55-60). May be I will sell call options but not now.

Disclaimer: These are my personal views and you should do your own due diligence before acting on anything written in this blog. Please take reasonable care while trading in options, especially while selling. I am not advising anyone to sell or buy options. My purpose of writing this blog is to highlight my trading strategies.


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