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