Trader has taste for International Flavors


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Volatility has been falling in International Flavors & Fragrances, and at least one trader thinks that trend will continue.

optionMONSTER's tracking programs detected the sale of about 3,500 December 55 puts, most of which priced for $0.50 to $0.60, against no existing open interest. Total options volume was 114 times greater than average in the session.

IFF IFF rose 0.84 percent to $55.17 yesterday, and pulled back after hitting a new all-time high of $55.50. The maker of scents for item such as soap and candy has been grinding steadily higher amid strong demand and good earnings.

Its implied volatility has been pushing lower at the same time, dropping from about 33 percent in July to 23 percent now. The put seller hopes volatility will remain low because a spike could push up the value of the puts he or she sold short.

They're essentially betting that IFF will remain above $55 through expiration, and want to profit from the accelerating drop of time decay that will occur as the options near the end of their cycle. See our Education Section for more.

A similar sale in IFF's December 50 puts was also detected about two weeks ago.

(Chart courtesy of tradeMONSTER)

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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This article appears in: Investing , Options

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