Market News

January 4, 2013  Fri 3:16 AM CT

TripAdvisor has been trending higher, and one investor wants a piece of the action.

optionMONSTER's tracking systems detected the sale of almost 12,000 February 41 puts against open interest of just 32 contracts. Most of them priced for $1.75 to $2.05.

The put seller is now obligated to buy shares of the travel-information company if they close below $41 on expiration. Including the credit earned, their entry price would be $38.95 to $39.25.

This trader probably likes the stock but doesn't want to expend capital getting long. He or she now has the right to make some money if the shares hold their ground and has essentially programmed a purchase order at an 11 percent discount to the current stock price if it does fall. (See our Education section)

Yesterday's trade also stands to benefit from the natural process of time decay, which will erase value of the puts sold short at an accelerating pace as expiration approaches six weeks from now. Total option volume was 14 times greater than average in the session.

TRIP fell 0.57 percent to $43.91 yesterday. The stock is up 45 percent since the beginning of November, fueled by a strong earnings report and the news that Liberty Interactive had purchased a controlling stake in the company.
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Education & Strategy

Using puts to BUY stock

Puts are an options contract that gives buyers the right to sell their stock for a set price on or before a future date. However, puts can also be an effective way to BUY stock.

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