Bleak Guidance Weighs On Infosys Ltd ADR (INFY)

A disappointing annual outlook for Infosys Ltd ADR (INFY) has stock and options volume surging

Oct 14, 2016 at 12:09 PM
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Infosys Ltd ADR (NYSE:INFY) is sinking today, after revising its annual guidance for the second time since July, trimming its growth target and sales estimate. Following the announcement, INFY's stock volume is on pace to touch an annual high, and its options volume is on pace to hit the 99th percentile of its annual range.

In the option pits, INFY calls are trading at 21 times their average daily clip, with 3,352 contracts crossing the line so far. It looks like a large portion of this action could be possible liquidations at the October 16 call. Prior to today, puts were the name of the game in INFY option pits; while both put and call open interest currently sit at an annual high, put open interest is roughly triple call open interest, with 95,356 puts on the record, compared to 33,153 calls.

From a technical standpoint, it's pretty easy to see why traders have been skeptical toward INFY lately. Today, INFY is trading 4.9% lower at $15.83, and the stock is currently down 9% since the beginning of 2016. It looks like INFY is currently testing a foothold at the $15.50-$16 level, which has contained pullbacks on several occasions during the past couple of years. The $15 mark also represents a roughly 50% gain from INFY's 2013 lows, and a 25% retreat from its April highs.

Infosys Ltd ADR (NYSE:INFY) short sellers are likely cheering today's price action. Short interest in the stock is up 6.5% over the last two reporting periods, and would take over two weeks of trading to cover, at INFY's average daily volume.

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