Trader bets Infinity will hold gains


Put selling dominates the early option trade today in Infinity Pharmaceuticals as it rebounds after reporting earnings yesterday.

A trader sold a single block of 3,000 November 11 puts for the bid price of $0.25 this morning, according to optionMONSTER systems. The volume was twice the previous open interest, so this is a new position.

The put seller sees INFI holding above its 52-week lows for the next week. But the trader carries the risk of having to buy shares if they are below $11.

Part of the trade thesis here is likely based on implied volatility . That part of the options' price usually inflates going into earnings and then drops immediately after, bringing down premiums. The average implied volatility for INFI coming into today was 152 percent, more than twice the actual volatility of the stock. (See our Education section)

INFI is up 11.8 percent this morning to $13.38 on positive reaction to the its third-quarter results and drug updates provided after yesterday's close. Shares hit a 52-week low of $11.57 yesterday.

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