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Record Highs Expected for Expedia Inc (EXPE) Post-Earnings

Expedia Inc will report earnings after tomorrow's close

by 7/30/2014 3:12 PM
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Call players are targeting Expedia Inc (NASDAQ:EXPE) today, as the online travel issue prepares to take its turn on the earnings stage after tomorrow's close. At last check, calls were trading at five times the average intraday pace, and outstripping puts by a more than 2-to-1 margin. Meanwhile, the equity's 30-day at-the-money implied volatility was up 2.0% to 60.0% -- in the 92nd percentile of its annual range -- indicating accelerated demand for EXPE's short-term options.

Drilling down, the August 85 call has seen the most action in EXPE's options pits, with 4,131 contracts on the tape thus far. The majority of these traded at the ask price and IV has popped 4.3 percentage points, pointing to the purchase of new positions. At-expiration breakeven for these call buyers is $88.22 (strike plus the volume-weighted average price of $3.22), with profit accruing on each additional step north of here. Conversely, losses are limited to the initial premium paid, should EXPE finish south of the strike at the close on Friday, Aug. 15, when front-month options expire.

While both the aforementioned strike and breakeven mark sit north of the equity's all-time high of $82.36, which was tagged on July 3, EXPE has done well since hitting its most recent low of $67.39 on May 8, with the shares up 20.5% to trade at $81.21. However, with short interest accounting for a lofty 9.9% of the stock's available float -- representing 8.7 times EXPE's average daily trading levels -- some of today's call buying could be a result of shorts hedging against any earnings-induced upside.

While EXPE's has had a number of volatile post-earnings price moves to both the upside and downside over the past seven quarters, history does tend to side with the bulls, with the stock averaging a single-session gain of 0.6%. Should the equity jump double-digits in the session subsequent to earnings -- as it did last October and this past February -- there is plenty of room for a short-covering rally to help fuel the security's fire. For Expedia Inc's (NASDAQ:EXPE) second quarter, Wall Street is calling for a profit of 76 cents per share -- a 12-cent improvement over what the company earned one year ago.


Yahoo! Inc. (YHOO) Traders Roll the Dice On More Gains

Yahoo! Inc. call volume is trading at two times the typical pace today

by 7/30/2014 2:23 PM
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Yahoo! Inc. (NASDAQ:YHOO) is up 3.1% this afternoon, amid unconfirmed reports that Chinese e-commerce concern Alibaba -- of which YHOO is a primary stakeholder -- is in financing talks with mobile messaging startup Snapchat. Options traders are responding in kind, with calls trading at more than two times the average intraday pace, and outpacing puts by a nearly 3-to-1 margin. Short-term options are in demand, too, per YHOO's 30-day at-the-money implied volatility (IV), which is 4.5% higher at 32%.

The vast majority of the day's call volume has centered on three strikes in particular: the September 40 and 45 calls, and the August 36 call. While the back-month options are being opened, they appear to be tied to stock, and part of a larger spread. However, drilling down on the front-month call, there seems to be a more "vanilla" set-up occurring.

Specifically, of the 25,654 contracts traded here, 83% have done so at the ask price, IV has edged higher, and volume outstrips open interest -- all signs of buy-to-open activity. With YHOO last seen at $36.77, these calls are comfortably in the money. In order for the call buyers to profit, though, the stock must be sitting north of breakeven at $37.25 (strike plus the volume-weighted average price of $1.25) at the close on Friday, Aug. 15, when back-month options expire. Gains are theoretically unlimited north of here, while losses are limited to the initial premium paid, should Yahoo! Inc. (NASDAQ:YHOO) settle south of the strike at expiration.


Big Bearish Bet Placed On Himax Technologies, Inc. (ADR) (HIMX)

Himax Technologies, Inc. (ADR) is soaring today, but one option bear isn't buying in

by 7/30/2014 1:35 PM
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Himax Technologies, Inc. (ADR) (NASDAQ:HIMX) has jumped nearly 10% on no apparent news, and is now trading around $6.42. As such, options trading is really heating up -- especially on the put side of the fence, where contracts are being exchanged at eight times the usual intraday rate. Short-term options are likewise in demand, per the tech stock's 30-day at-the-money implied volatility (IV), which has spiked 9.3% to 77.5%.

By far HIMX's most active strike is the August 6 put, where 8,603 contracts are on the tape -- more than seven times the volume of the second most active strike. The majority of the out-of-the-money puts traded as a sweep of 4,942 contracts -- at the ask price of $0.30 apiece -- resulting in a total cash outlay of nearly $150,000 (premium paid * number of contracts * 100 shares per contract). IV also shot higher at the sweep, pointing to freshly minted bearish bets.

Digging deeper, this headline trader will profit if HIMX is sitting below $5.70 (strike less premium paid) at the close on Friday, Aug. 15 -- when the front-month contracts expire. Additional gains will be had the lower the underlying is positioned, whereas the most the put buyer stands to lose is the initial premium paid, should the contracts expire out of the money.

From a wider perspective, Himax Technologies, Inc. (ADR) (NASDAQ:HIMX) has struggled greatly in 2014, losing about 56% of its value. In fact, the shares touched the aforementioned breakeven mark of $5.70 as recently as July 18. Looking ahead, the company will report second-quarter earnings before the open next Thursday, Aug. 7.


Options Radar: Galectin Therapeutics, Electronic Arts, and Staples

Reviewing notable options activity on Galectin Therapeutics Inc., Electronic Arts Inc., and Staples, Inc.

by 7/30/2014 1:21 PM
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Three stocks seeing notable options activity today are biotechnology firm Galectin Therapeutics Inc. (NASDAQ:GALT), video game guru Electronic Arts Inc. (NASDAQ:EA), and office supply issue Staples, Inc. (NASDAQ:SPLS). Here's a look at how today's options traders have been placing their bets on GALT, EA, and SPLS.

  • Following yesterday's roughly 61% plunge, GALT is soaring today, after issuing a statement of defense for the clinical trial results of its liver drug, GR-MD-02. In fact, the shares -- whose steep sell-off yesterday sent Galectin Therapeutics Inc. to the short-sale restricted (SSR) list -- were last seen 22.8% higher at $6.99. Meanwhile, in the stock's options pits, overall volume is trading at seven times the average intraday pace, with buy-to-open activity detected at the January 2015 7.50-strike call and the August 7.50 call.

  • EA has edged 0.3% higher to $34.45 this afternoon, in the wake of launching its new video game subscription service for Microsoft Corporation's (NASDAQ:MSFT) Xbox. On the charts, the equity has performed well in 2014, and has tacked on roughly 50%. Meanwhile, in Electronic Arts Inc.'s options pits, calls are trading at 11 times what's typically seen at this point of the day, with nearly all of the volume centering on the September 37 and 41 calls and the December 37 and 41 calls. According to Trade-Alert, one cautiously optimistic trader may be giving her bet a few more months to play out, by rolling out her September bull call spread to the December series.

  • SPLS is up 0.9% at $11.18 this afternoon, and is making an honest effort to notch a daily close north of its 50-day moving average -- currently located at $11.15 -- for the first time since taking a 12.6% earnings-induced dive on May 20. Option traders in today's session are rolling the dice on the equity bucking this bearish post-earnings price action when SPLS steps into the confessional ahead of the open on Wednesday, Aug. 20, by buying to open the stock's out-of-the-money September 12 calls. With more than 14% of Staples, Inc.'s float sold short, though, some of this activity could be at the hands of shorts hedging against any unexpected upside.


Most Active Options Update: Netflix, Inc. (NFLX)

Netflix, Inc. option traders are placing low-priced, short-term bets

by 7/30/2014 12:51 PM
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The 20 stocks listed in the table below have attracted the highest total options volume during the past 10 trading days. Names highlighted are new to the list since the last time the study was run, and data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White. One name of notable interest today is Netflix, Inc. (NASDAQ:NFLX), which is popular among short-term speculators.

Most Active Options Table

Netflix, Inc. is bucking the broad-market trend lower today, up 1.4% at $430.30. The stock is on pace for a 2% weekly gain, as traders hope for a streaming Seinfeld deal and digest the company's freshly inked interconnection agreement with AT&T Inc. (NYSE:T).

In today's session, speculators are seemingly taking advantage of low-priced NFLX options. The stock's 30-day at-the-money implied volatility (IV) hit a 52-week low earlier in the session, but was last seen 1.2% higher at 29.9%.

Weekly options expiring on Friday are dominating the options pits, and make up nine of the 10 most active NFLX contracts thus far. The weekly 8/1 425- and 430-strike puts, as well as the weekly 8/1 430-strike call, have all seen volume exceed open interest, hinting at new initiations. Underscoring this theory, IV is several percentage points higher at each strike. Meanwhile, the majority of the options have traded on the ask side, pointing to buyer-driven volume.

The volume-weighted average price (VWAP) of the 425-strike put is $2.29, making at-expiration breakeven $422.71 (strike minus VWAP). The buyers' profit will increase the lower NFLX sinks beneath breakeven, while risk is capped at the initial premium paid, should the stock remain atop the strike through Friday's close. In light of the stock's advance, delta on the put has fallen to negative 0.31 from negative 0.52 at Tuesday's close, suggesting the options have about a 31% chance of expiring in the money.

Due to its added intrinsic value, the VWAP of the 430-strike put is $4.21, making breakeven $425.79. Because the put is at the money, its delta stands at negative 0.51, giving the options about a 1-in-2 shot of being in the money at expiration. Again, risk is capped at the initial premium paid, if NFLX is perched atop $430 at week's end.

Meanwhile, the VWAP of the weekly 8/1 430-strike call is $3.74. As such, the short-term bulls will begin to profit if NFLX extends its climb and topples $433.74 (strike plus VWAP) by Friday's close, with gains theoretically unlimited to the upside. As with the puts, the maximum loss is limited to the initial premium paid for the call, should Netflix, Inc. (NASDAQ:NFLX) shares end the week beneath $430. Delta on the call has surged in light of the stock's uptick, and now stands at 0.49, compared to 0.30 at yesterday's close.


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