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International Flavors sees put selling
International Flavors & Fragrances has been surging higher,
and one investor apparently thinks that it's impervious to a big
optionMONSTER's tracking systems detected the sale of about 10,800 December 50 puts for $0.45 to $0.55 against open interest of just 308 contracts. The trade accounted for 94 percent of the option volume in the maker of specialty chemicals.
IFF fell 0.88 percent to $51.53 yesterday. The stock has been climbing steadily since the market bottomed in March 2009 amid growing demand for its products, which are used in a wide array of items such as perfume, soaps, and candy.
Its last earnings report on Nov. 4 was significantly better than expected in profit and revenue, triggering a rally in the share price. They have pulled back since but remained above the same $51 price where they peaked in April, indicating that a new support level is in place.
That could have persuaded the investor to sell puts, allowing him or her to keep the premium as long as IFF remains above $50 through expiration. Below there, they will have to buy the stock at the strike price.
Put selling is a common strategy among investors who like a company and are willing to own it in the event of a pullback. (See our Education section)
The transaction pushed total options volume in the company to 370 times greater than average.
(Chart courtesy of tradeMONSTER)