Amdocs reports earnings Wednesday afternoon, and one investor is
The trade consisted of a short sale in the January 30 puts and the
January 30 calls. The puts brought in about $1.37 while the calls
priced for $1.88, resulting in a net credit of $3.25. More than
1,400 contracts changed hands in both strikes.
DOX rose 0.33 percent to $30.52 in afternoon trading. The provider
of customer-service software fell on July 22, when management
issued lukewarm guidance. It continued falling into late August and
has rallied about 18 percent since then.
The shares have now returned to about the same level where they
rolled over in late May, and today's option trader apparently
thinks they will remain in this range.
The option strategy, known as a short straddle, will make money as
long as DOX remains between about $26.75 and $33.25. It will also
benefit from lower implied volatility, which would reduce the
premiums on the contracts sold short. (See our Education section)
Implied volatility in DOX has been hovering at 28 percent since
August, despite realized volatility falling to about 17 percent.
Implied volatility often falls after companies report earnings, a
trend the short straddle is apparently trying to exploit.
The trade pushed total options volume in DOX to 4 times greater
(Chart courtesy of tradeMONSTER)
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