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Options Players Prefer Pre-Earning Puts on Ctrip.com

CTRP's struggle to gain ground has fanned the bearish flames

by 5/8/2012 2:25:24 PM
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Speculators on the International Securities Exchange (ISE) and Chicago Board Options Exchange (CBOE) have developed an affinity for puts on Ctrip.com International, Ltd. (CTRP - 19.75). During the course of the past five sessions, traders have bought to open 4,126 puts, versus just 279 calls. CTRP's five-day put/call volume ratio now sits at a bearishly biased 14.79.

It appears that this taste for puts has been rising in recent weeks, judging by the stock's 10-day ISE/CBOE/NASDAQ OMX PHLX (PHLX) put/call volume ratio of 3.72. This ratio ranks higher than 82% of similar readings taken in the past year, implying that puts have been bought to open over calls at accelerated levels.

Echoing this growing trend toward puts is CTRP's Schaeffer's put/call open interest ratio (SOIR). Since April 30, the equity's SOIR has edged up to 2.13 from 1.87, as short-term put open interest climbed 28%. This ratio is now ranked in the 90th percentile of its annual range, suggesting that near-term options traders have rarely been more put-heavy toward CTRP.

Sentiment is equally as gloomy outside of the options pits. For starters, short interest stands at a significant 9.7% of the stock's available float. Plus, no less than 75% of analysts maintain a "hold" or "strong sell" suggestion toward the equity.

Checking out CTRP's technical backdrop, it seems that these heavy levels of skepticism could be warranted, with the shares down 58.6% on a year-over-year basis. CTRP fell below its 32-day moving average in early March, and has struggled against this descending trendline since. What's more, the stock tagged a three-year low of $19.43 in today's session.

Daily Chart of CTRP since January 2012 With 32-Day Moving Average

Another plausible explanation for the pessimism surrounding the equity is the company's impending earnings announcement. The China-based travel concern is slated to unveil its first-quarter results after the market closes next Wednesday, May 16. Wall Street is predicting a per-share profit of 18 cents for CTRP. The company fell just shy of analysts' profit estimates in the previous quarter, which may have encouraged some of these bears to climb on board.

After paring some of its earlier losses, CTRP is down 1.2% to trade near $19.75.

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