Options Trading News

July 12, 2013  Fri 2:14 AM CT

A large bearish trade dominated the unusual option action in online travel agency Expedia yesterday.

optionMONSTER's Depth Charge system shows that 10,500 July 59.48 puts were bought for the ask price of $0.25. This is a new position, as there was no open interest at that strike before the trade appeared.

The put buying wasn't tied to any trading in the underlying stock identified by our systems. This is likely an outright bearish play with the trader making a cheap bet that EXPE will see a sharp pullback by expiration at the end of next week. It is possible that this is protection on a long position, but such hedges rarely involve out-of-the-money puts that expire so soon.

The delta of these options suggests that there is just a 10 percent probability that the stock will be below the $59.48 strike price by next Friday. But EXPE was below that level just two weeks ago and was as low as $55 a month ago. (See our Education section)

Shares finished yesterday at $63.08, down fractionally on the session after starting the day at their highest levels since gapping down on earnings results in April.
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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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