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Bears See Spring Losses for International, Ltd. (ADR) (CTRP)

Traders scoop up CTRP's May-dated puts as earnings loom

by 4/10/2013 10:05 AM
Stocks quoted in this article: International, Ltd. (ADR) (NASDAQ:CTRP) was the target of some bearish speculation yesterday, as nearly 7,700 puts crossed the tape during the course of the session. This was almost quadruple the norm, and more than six times the number of calls exchanged. Traders were focused on the May series of options, and placed their bets on a short-term decline for the travel website.

Snagging the lion's share of the action was the May 20 put, where 5,102 contracts changed hands -- the majority of them at the ask price, implying they were purchased. These out-of-the-money puts traded at a volume-weighted average price (VWAP) of $0.67. Meanwhile, open interest at this strike surged by 4,126 contracts overnight, making it safe to assume that most of yesterday's volume was comprised of newly added positions.

In this scenario, speculators are expecting International Ltd. (ADR) to sink below $19.33 (strike price less the VWAP) by the close on May 17, when these back-month options expire. This denotes a 9.7% decline from yesterday's closing price of $21.40. Also of note, these options sported a delta of negative 0.30 at the end of Tuesday's session, meaning they have a near 1-in-3 chance of finishing in the money.

Widening the sentiment scope shows that CTRP puts were in demand prior to yesterday's trading activity. According to data pulled from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), speculators have bought to open 4,765 puts during the past two weeks, compared to 2,870 calls. The resultant 10-day put/call volume ratio of 1.66 ranks higher than 80% of comparable 52-week readings, meaning traders have been placing bearish bets over bullish at a quicker-than-usual step lately.

This pessimism toward CTRP isn't terribly surprising, given the stock's year-to-date loss of more than 4%. The shares have also underperformed the broader S&P 500 Index (SPX) north of 17 percentage points during the past three months. Fundamentally speaking, the company is tentatively scheduled to report first-quarter earnings between May 13 and May 17 -- just in time for May options expiration -- and has bested consensus bottom-line estimates in three of the past four quarters. However, Tuesday's bears may be counting on an earnings miss, which could pressure the equity lower.

At last check, International Ltd. (ADR) is up around 1.6% right out of the gate to trade at $21.75.


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