Infosys historically has
shown volatile movements after the earnings release. Stock has moved close to 8.2% on an average
after earnings release for last 12 quarters. Table 1 below presents the implied volatility
levels for first two months before earnings, expected volatility crush after
earnings release, stock and at the money straddle performance.
 |
Implied volatility levels,
straddle pricing, stock and straddle performance
|
Currently, at the money
straddle for options expiring on January 18 is pricing a move of 8.4 % in the
stock (Close to 12 quarter average move). 30 day and 60 day implied volatility levels
shown in figure 4, present fair pricing of options. After converting straddle
prices into standard deviation terms, these options seem to be fairly priced as
we approach earnings on Friday.
