Expedia Bulls Pounce After C-Suite Shake-Up

Short-term options premiums are relatively cheap at the moment

Dec 4, 2019 at 11:53 AM
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Expedia Group Inc (NASDAQ:EXPE) stock is up 6.5% today to trade at $105.89, on news the online travel company's CEO and chief financial officer have stepped down amid a disagreement with the board over business strategy. This follows the stock's devastating reaction to Expedia's third-quarter earnings report last month, and has options traders in overdrive.

At last check, roughly 37,000 calls and 11,000 puts have changed hands on EXPE -- six times what's typically seen, and total options volume pacing in the 100th annual percentile. The December 110 and January 2020 110-strike calls are most active, and it looks like new positions are being purchased here. If this is the case, call buyers are betting on a breakout above $110 over the next several weeks.

This bullish bias is nothing new in EXPE's options pits. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day call/put volume ratio of 5.45 registers in the 100th annual percentile. In other words, calls have been bought to open over puts at an accelerated clip.

With earnings in the rearview mirror, implied volatility (IV) has imploded on EXPE stock, making it an attractive time to purchase options premium. Expedia's Schaeffer's Volatility Index (SVI) of 24% arrives in the 17th annual percentile, meaning short-term options have priced in lower volatility expectations just 17% of the time over the past year.

Looking closer at the charts, EXPE's Nov. 7 earnings-induced sell-off put the stock on the path to its Nov. 19 three-year low of $93.53. Since then, the shares have recovered 13.7%. But while today's gap has the equity back above its 20-day moving average, it's still got a ways to go before it fills that recent bear gap.

expe stock daily price chart on dec 4


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