2 Travel Stocks With Short-Term Options Trading Opportunities

Priceline tends to struggle in September, while Expedia historically shines

Sep 6, 2017 at 11:23 AM
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Travel stocks are getting a double-barreled blow today, following a profit warning from online hotel search website Trivago (TRVG) and as Hurricane Irma bears down on the Caribbean. Among those trading lower are Priceline Group Inc (NASDAQ:PCLN) and Expedia Inc (NASDAQ:EXPE) -- down 1.1% and 2.9%, respectively. And while PCLN could be due for bigger headwinds this month, EXPE may be ready to bounce back.

Priceline is the Worst Stock to Own in September

After hitting a record high of $2,067.99 on Aug. 8, Priceline stock gapped lower on a soft profit forecast. The shares have been struggling ever since, and are now staring up at their formerly supportive 120-day moving average, trading at $1,824.41. 

If past is precedent, these technical troubles could continue over the next several weeks. According to data from Schaeffer's Quantitative Analyst Chris Prybal, PCLN has been the worst stock to own on the S&P 500 Index (SPX) in September -- averaging a loss of 8.5% over the last 18 years, and finishing the month positive just 44% of the time.

While PCLN's high share price could sideline a number of potential traders, options allow for another vehicle to bet on the stock's short-term trajectory at a fraction of the cost. Plus, with low volatility expectations priced into short-term Priceline options, it's a relatively affordable time to buy premium. Specifically, the security's Schaeffer's Volatility Index (SVI) of 16% ranks in the 13th annual percentile.

Expedia Short Sellers Have Started to Cover

Expedia shares were last seen trading at $142.83, testing support at their 120-day moving average -- a trendline that kept a lid on the stock in December and January. Just below here is the $142 level, which represents a 38.2% Fibonacci retracement of EXPE's 2017 rally to its July 28 record high of $161, and coincides with a 25% year-to-date return.

A repeat of history would have EXPE shares brushing off today's sector headwinds, and finishing the month of September strong. Per Prybal's data, Expedia stock has averaged a 2% monthly gain over the last 12 years, boasting a 67% win rate.

A continued round of short covering could also help boost the shares. Although short interest edged down 2.4% in the most recent reporting period, nearly 12% of the stock's float is sold short, or 7.1 times the average daily pace of trading. 

Plus, it's a relatively affordable time to purchase premium on EXPE's short-term options. The stock's SVI of 25% ranks lower than 74% of all comparable readings taken in the past year.


 

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