A Trade on INFY

Dear fellow options traders :

Noted that Infosys Technologies Ltd (ticker : INFY), an IT company providing information technology enabled business solutions, would be reporting earnings on 9 Oct 08, after-market-close.

I believed a lot of you have witnessed how the global stock markets were hammered hard by the tumultuous financial turmoil recently. This financial crisis, which stemmed from the bad sub-prime mortgages created a few years ago, was so bad that even the gigantic US$700 billion bailout package and the global efforts to cut interest rates, couldn't stop the continuous plummeting of the stock markets in these 2 weeks.

By the way, I've checked that the industry sector where Infosys Technologies Ltd (ticker : INFY) belonged to, ie. Technical System Software, did not perform too well either. I've also read from research analysts' comments in Briefing.com that most firms would cut their IT budgets in such a drastic economic environment.


Thus, I put up a limit order to buy a near-the-money Oct 30 Put option at $190.00 on Friday, 3 Oct 2008 when INFY was trading around $31.00.

On Monday, 6 Oct 2008, the US stock market plunged severely in the opening trading hours. When I saw the share price INFY plunged beyond -$2.00 around 10.00am EST, I quickly put up a limit order to sell my position at $440.00, which was executed pretty fast because the stock price plunged quickly beyond -$3.00 near 10.30am EST.



In such a volatile & depressing stock market environment, that was an opportunity where profit could be earned without me taking the risks to hold on to the position till earnings announcement on 9 Oct 2008.

Anyway, on 10 Oct 08 before-market-open, Infosys Technologies Ltd (ticker : INFY) reported Q2 earnings of $0.56, $0.01 better than the consensus of $0.55; revenues rose 19.0% year/year to $1.22 bln vs the $1.21 bln consensus. However, INFY reset its FY09 revenue growth rate guidance at 13%-15%, down from 19%-21%. On 10 Oct 08, INFY gapped down -$2.00 to $23.25 & closed at $23.91.

Yours Truly,

Tony Chai