Options Trading News

January 27, 2014  Mon 12:20 PM CT

Ctrip.com has pulled back after a huge rally, and now the bulls are getting back in.

optionMONSTER's Heat Seeker monitoring program detected the purchase of some 7,000 February 40 calls for $1.83 and the sale of an equal number of February 45 calls for $0.63, resulting in a cost of $1.20. Volume was below open interest at the higher strike, so there are two possible explanations of the activity.

One is that both halves of the trade were opened, in which case it was a bullish call spread with potential profit of 317 percent on a move to $45 or higher. Alternatively, the investor may have already owned the 45s and rolled them down to the 40s to keep their upside exposure to the stock. (See the discussion of delta in our Education section for more.)

CTRP is down 6.39 percent to $37.08 in afternoon trading. It tripled in value between April and October but has been falling since. The Chinese online travel agency is now back around the same level where it gapped higher in August and consolidated two years earlier. That could make some chart watchers think that the stock is at support and will bounce.

The company's next earnings report is scheduled for Feb. 13 before the opening bell.

Total option volume is double its daily average for the last month, with calls outnumbering puts by more than 2.5 to 1.
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As I stated in last week's article, a break out or a break down needs to have a couple things happen before it is considered a confirmed break out or break down. The only problem is that in today's market where things move much more quicker than they did just a few years ago, two days could wind up being the majority of the expected movement, if not the whole movement.

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