Option Investor

New Portfolio Position: IFIN "Bear-Call" Spread Projected Gain = $250

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IFIN - Investors Financial Services $43.68

Investors Financial Services (NASDAQ:IFIN) is a bank holding company that provides a range of asset administration services for the financial services industry through its primary operating wholly owned subsidiary, Investors Bank & Trust Company. The company provides core services and value-added services to a variety of financial asset managers, including mutual fund complexes, investment advisors, family offices, banks and insurance companies. Core services include middle office outsourcing, global custody, multicurrency accounting and fund administration. Value-added services include securities lending, foreign exchange, cash management, performance measurement, institutional transfer agency, investment advisory services, lines of credit, and brokerage and transition management services.

This stock emerged in a search for (technically) "bearish" issues with favorable option premiums. The share price of IFIN has recently dropped below an intermediate-term trading range and the volume during the decline suggests the selling pressure was sustained by a large number of investors. Since the company's profit report has already been posted this quarter, the new trend will likely continue unless there is a significant catalyst with regard to interest rates or the housing (mortgage) market. Traders who believe there is little upside potential in either of these areas should consider this play. A 10-contract position is recommended to offset commission costs.

Fundamentals Chart Earnings Dates Analyst Ratings

PLAY (less conservative - bearish/credit spread):

BUY CALL MAY-50.00 FLQ-EJ OI=1134 ASK=$0.15
SELL CALL MAY-47.50 FLQ-EW OI=3920 BID=$0.35

POTENTIAL PROFIT (X 10 contracts @ $0.25) = $250
MARGIN REQUIREMENT (X 10 contracts) = $2250
COST BASIS = $47.75


Once the position is open, a "net-debit" order of $0.50-$0.60 to close the spread may be appropriate for some portfolios. However, we are also considering a "covering" transaction with JUL-$47.50 calls to initiate a neutral-outlook calendar spread. An effective adjustment would involve a "contingent" order to purchase the JUL-$47.50 calls if the stock trades near the sold (call) strike on an intraday basis. With the previous "comfort zone" between $48-50, this may be the most appropriate way to manage the position in the event of unexpected (bullish) activity.

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