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Expedia Inc (NASDAQ:EXPE) is seeing considerable action on the options front today, and it's largely the result of a single block trade. Earlier this morning, a block of 3,000 July 59.48 calls changed hands near the ask price at $2.05. A corresponding uptick in implied volatility suggests that these options were bought to open -- particularly since open interest at this strike currently totals just 762 contracts.
Expedia is currently trading at $57.75, which means that today's trader is crossing his fingers in the hopes that the shares of the online travel company can muscle north of $61.53 (strike price plus premium paid) prior to the close on July 19, when back-month options expire. Profitability is uncapped from that point forward, whereas losses are limited to the initial net debit.
Over and against this morning's big trade, the prevailing sentiment on EXPE is pessimism. The equity's International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) 50-day put/call volume ratio is 0.76. Although this means that -- in absolute terms -- calls bought to open have outnumbered puts bought to open for the past two-plus months, the figure indicates bearishness from a relative perspective. Specifically, the ISE/CBOE/PHLX ratio has been higher just 4% of the time over the past year, meaning that options traders have rarely been as put preferential as they are currently.
Furthermore, Schaeffer's put/call open interest ratio (SOIR) on Expedia stands at 0.92, which registers in the 91st percentile of its annual range. In other words, compared to call open interest, put open interest on options expiring in the next three months is not too far from its 12-month high.
This shouldn't come as much of a surprise, given Expedia's performance on the charts. The stock has lost about 6% in 2013, and hasn't recovered after gapping downward following April's poorly received first-quarter earnings report. The gap dropped EXPE below its 40-week moving average for the first time since late 2011, creating a potential level of resistance around former support in the $60 area.
Case in point: Expedia Inc's (NASDAQ:EXPE) rally attempt last week was stymied at $59.