Put Volume Skyrockets as Trip.com Spirals

TCOM puts are trading at 10 times the average intraday pace

Jan 24, 2020 at 2:40 PM
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Chinese stocks have taken a hit this week, as coronavirus fears ramp up. Shanghai-based travel firm Trip.com Group Ltd (NASDAQ:TCOM) is one name that's taken a big hit, with the stock down 6.9% today at $31.89, pacing for its fourth straight drop -- its longest losing streak since an eight-day stretch back in November.

Against this backdrop, put volume has picked up on TCOM stock, with 26,000 puts on the tape today -- 10 times what's typically seen at this point in the session, and five times the number of calls traded. The February 26 put is most active, and it looks like new positions are being purchased here for a volume-weighted average price of $0.20. 

If this is the case, breakeven for the put buyers at the close on Friday, Feb. 21 -- when the front-month options expire -- is $25.80 (strike less premium paid). Profit will accumulate on a move below here, while the most the speculators stand to lose is the initial premium paid, should TCOM close above the strike at expiration.

Bears have already been circling TCOM in recent weeks. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day put/call volume ratio of 1.38 ranks in the 78th annual percentile, meaning puts have been bought to open over calls at a quicker-than-usual clip.

Looking at the charts, it's been a volatile stretch for the Chinese stock, per its 30-day historical volatility of 56.3% -- in the elevated 92nd annual percentile. The shares had been chopping higher atop a trendline connecting lower highs since late November, but are now trading below this trendline, as well as their 80-day and 120-day moving averages, following this week's slide.

tcom stock daily price chart on jan 24


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