Bullish Betting Ramps Up Ahead of INFY Earnings

Wells Fargo upped its price target by $2 to $10.50, too

Digital Content Manager
Jan 9, 2020 at 1:35 PM
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Tech name Infosys Ltd (NYSE:INFY) is getting a boost ahead of its upcoming earnings report, due out before the market opens tomorrow, thanks in part to a price-target lift from Wells Fargo. The brokerage upped its target to $10.50 from $8.50. At last check, the shares of the consulting concern were up 2.3% to trade at $10.32. 

Since a late-October bear gap, and subsequent one-year low of $8.76, INFY has managed to add over 17%, with a recent pullback captured by its 40-day moving average. However, the 320-day moving average, which previously acted as a floor on the charts, has thwarted several attempts to close INFY's previously mentioned bear gap, including today's rally. Year-over-year, Infosys is clinging to a roughly 5% gain. 

INFY Jan 9

In the past, INFY has made relatively modest moves the day after earnings, with one 6.3% pop after its July report, and a 7.7% dip in April 2018. During the past eight quarters, the stock has averaged a next-day move of 4.2%, regardless of direction, slightly smaller than the 7.5% swing the options pits are pricing in this time around. 

Speaking of option pits, things are heating up before INFY enters the earnings confessional tomorrow. So far, 2,037 calls and 1,623 puts have crossed the tape -- four times the intraday average. The most popular contract is the January 2020 10-strike put, where it looks like positions are being sold to open, followed by the January 2020 11-strike call, with contracts possibly being purchased here. 

This bullish bias toward INFY is nothing new. In the last 10 weeks, 5.33 calls have been bought to open for every put on the the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio sits higher than 84% of all other readings from the past year, too, suggesting that this recent preference for long calls relative to puts is unusual.


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