Shares of Navistar International (NAV) are trading lower on the session by 7.06%, at $19.09. The stock has been under pressure for the past few days on word that the company may need to raise more capital.
Echoing today?s downside movement, one institutional trader is again betting on the down side. A short while ago a three-way spread went up on Navistar, where the October $20.00 put traded 14,000 times, below the bid, for $0.25 just as the November $16/18 bear risk reversal traded at a net credit of $2.10.
Given the open interest on all three strikes, this is clearly a roll of puts in Oct to a bearish risk reversal in Nov. That does not tell the whole story though?
For the past few months, the trader has been selling risk reversals and rolling them month-to-month. The current put position in Oct is a function of an August $22/25 bear risk reversal that was rolled into the Oct $20/22.50 bear risk reversal back at August options expiration. The remaining short call leg of the October position was unwound in smaller lots this week.
This trader has been collecting huge premiums with each passing month, calling each and every slide in the stock almost perfectly.
30-day implied volatility is up 8% today to 63.67%; 10-day historical vol is registering 58.04%.
Navistar International Corporation is a holding company, whose principal operating subsidiaries are Navistar, Inc. and Navistar Financial Corporation.