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Near-Term Put Activity Hits Fever Pitch on Expedia Inc


However, not all of this put volume is bearish in nature.

Expedia Inc (NASDAQ:EXPE) is trending lower in parity with the broader market today, off 0.7% to hover at $52.47. Meanwhile, put players have taken a shine to the online travel concern, as roughly 7,600 of these contracts have switched hands thus far. This is six times the equity's expected intraday put volume, and more than eight times the number of calls exchanged.

The clear front-runner has been the November 50 strike, where north of 5,600 puts have crossed at a volume-weighted average price (VWAP) of $2.44. However, the bulk of the contracts traded at the bid price, suggesting they were sold. Since this put doesn't hold any contracts in open interest, it's likely that new positions have been added here.

By selling the puts to open, traders are wagering that EXPE will remain perched atop the $50 mark through the close on Nov. 15 -- a time frame that may encompass the firm's next earnings release, which is tentatively scheduled for Oct. 30. This would render the options worthless, and allow the speculators to pocket the initial premium collected. The delta for this put is docked at negative 0.36, implying it has a 36% chance of finishing in the money. If the puts move into the money, the sellers could find themselves on the hook to buy the shares at $50 each, no matter how low the stock should fall between now and November expiration.

From a technical perspective, Expedia Inc has shed nearly 15% year-to-date, due largely to an earnings-induced bearish gap on July 26, which resulted in a single-session loss of 27.4%. However, the shares have gained a bit of momentum of late, outpacing the broader S&P 500 Index (INDEXSP:.INX) by close to 11 percentage points during the past two months. Moreover, the $52 level, which is home to EXPE's 10-day moving average, has recently emerged as a foothold for the security.

This article by Terri Stridsberg was originally published on Schaeffer's Investment Research.

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Twitter: @schaeffers
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