(NASDAQ:EXPE) has been a dud in 2013. The travel website is up less than 4% year-to-date, and over the past three months
, it has lagged the broader S&P 500 Index
(INDEXSP:.INX) by 5-plus percentage points. The lackluster showing prompted Susquehanna to start EXPE with a "neutral" rating
yesterday, which had the option bears coming out in droves.
Put volume paced the day in Expedia's options pits, with 12,000 contracts traded compared to an expected daily volume of 1,251 puts, and an actual call volume of 654 contracts. In focus was the July 59.48 put, where over 80% of the action took place, mostly on a single block trade of 9,351 contracts that changed hands at the ask price of $0.25 -- meaning they were bought. Open interest added over 9,700 contracts overnight, as well, which indicates the positions were freshly minted.
In order for the block trader to profit, he needs the shares of EXPE -- which are up 0.6% this morning at $63.44 -- to descend to $59.23 (strike price less the premium paid) by the closing bell next Friday, when front-month options expire. If that move doesn't come to fruition, however, the most the bearish speculator has at stake is the initial net debit.
Taking a step back, from a wider sentiment perspective, traders of late have been more bullish than usual toward Expedia. The stock's 50-day call/put volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) is 2.39. In other words, through the past 10 weeks, calls have been bought to open over puts at a pace faster than 2-to-1. The ratio stands in the 76th percentile of its annual range, too, revealing the above-average preference for long calls over puts.
Nevertheless, as the lackluster technicals mentioned earlier continue to weigh on the option bulls, they may begin to unwind their open positions, creating additional headwinds for Expedia Inc.
This article by Alex Eppstein was originally published on Schaeffer's Investment Research.
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No positions in stocks mentioned.