Bullish Options Traders Double Down After Expedia Inc (EXPE) Earnings Beat

Expedia Inc (NASDAQ:EXPE) is once again making a big post-earnings move

Apr 29, 2016 at 11:28 AM
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Expedia Inc (NASDAQ:EXPE) has jumped 8.2% today to trade at $115.81, after the travel site unexpectedly turned a profit during the first quarter. Big earnings-related moves are nothing new for EXPE, though, with the stock boasting single-day post-earnings gains of 9.6%, 7.3%, 12.9%, and 7.9% over the past four quarters. With the stock now battling its 200-day moving average and trading volume on pace to challenge an annual high, EXPE options traders are taking action. 

Specifically, today's call volume on EXPE arrives in the 99th percentile of its annual range -- at six times the intraday average. The weekly 4/29 series is extremely popular, accounting for seven of the eight most popular strikes. Among the most active options in this series are the 116- and 117-strike calls, with data hinting at buy-to-open activity. In other words, traders are positioning themselves for further gains ahead of expiration at today's close. 

Looking back, call buying has been popular on EXPE in recent weeks. The stock's 10-day call/put volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) comes in at 1.63, which tops 86% of readings from the past year. 

A closer look at the data shows that the weekly 4/29 116-strike call saw the biggest change in open interest over the last 10 sessions, with nearly 11,000 positions added. Assuming some of these contracts were bought to open, today's price action should please many EXPE options traders, with the stock's intraday high standing at $118. 

There's a twist, though. EXPE is heavily shorted, with short interest rising another 16% over the past two reporting periods. Now, it would take EXPE short sellers almost six sessions to repurchase their shares, at the stock's average daily trading pace. Considering this, it's possible that some of the recent call buying can be attributed to shorts buying insurance

As for analysts, most are bullish on Expedia Inc (NASDAQ:EXPE), with 14 of 20 calling the stock at least a "buy." Just this morning, in fact, no fewer than five brokerage firms raised their price targets on EXPE, with Raymond James setting its target at $136 -- just shy of the stock's all-time high of $140.51 from November. 

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