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Expedia Inc (EXPE) Bears Bet On Another Post-Earnings Plunge

Traders hone in on EXPE's near-term puts

by 10/23/2013 12:01 PM
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Option Brief: Expedia Inc (NASDAQ:EXPE) is up about 0.7% today to trade at $49.25, after FBR started coverage of the stock with an "outperform" rating this morning. Nevertheless, bearish betting has hit fever pitch, as approximately 12,000 puts have switched hands thus far -- nearly six times the norm. By contrast, around 5,100 calls have been exchanged.

Today's front-runner is the December 50 put, which has seen over 7,100 contracts cross at a volume-weighted average price of $4.01. A large portion of these in-the-money contracts traded at the ask, implying they were purchased. Since this option holds open interest of just 1,022 puts, it's likely that fresh long positions have been created here.

In this scenario, the traders are wagering that EXPE will keep falling south of the strike price through back-month options expiration. The delta for this call stands at 0.51, suggesting the option has a better than 1-in-2 chance of expiring in the money. Should the stock be perched north of the $50 mark at the close on expiration Friday, Dec. 20, the put buyers will forfeit the initial cash outlay.

Expedia Inc (NASDAQ:EXPE) has been a technical laggard in 2013, shedding close to 20% year-to-date, and trailing the broader S&P 500 Index (SPX) by around 8.5 percentage points during the past month. Meanwhile, the online travel company is due to report third-quarter earnings after the closing bell on Wednesday, Oct. 30. Although the firm bested consensus bottom-line estimates in six of the past eight quarters, the stock plummeted 27.4% the day after its July earnings report. It's possible today's put buyers are looking for a repeat performance this time around.


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