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Expedia Options Volume Jumps As Shares Tumble

Today’s tickers: EXPE, KO & HAL

EXPE - Expedia, Inc. – Shares in online travel company, Expedia, Inc., are getting pummeled today, down as much as 27% during morning trading to a new 52-week low of $47.55, after the company yesterday reported second-quarter earnings and revenue that missed analyst estimates. Some options traders are bracing for further near-term declines in the price of the underlying shares, snapping up roughly 1,000 Aug $45 strike puts for an average premium of $0.64 apiece. The contracts make money at expiration next month if shares in Expedia drop 6.7% from today’s low of $47.55 to breach the average breakeven point on the downside at $44.36. The Sep $45 strike put options are also attracting fresh interest, with around 2,500 contracts in play versus open interest of just 50 contracts. It looks like most of the Sep $45 puts were purchased for an average premium of $1.20 apiece this morning. Meanwhile, trading traffic in the Jan 2014 calls suggests one trader may be positioning for shares in the name to rebound significantly by expiration next year. The strategist appears to have purchased a 1,500-lot Jan 2014 $54.48/$64.48 bull call spread at a net premium of $1.75 per contract. The spread starts making money if shares in Expedia rally 18% off today’s low to exceed the effective breakeven price of $56.23, with maximum potential profits of $8.25 per contract available on the position given a more than 35% upside move in the price of the underlying to $64.48 by expiration next year.

KO - Coca-Cola Co. – Activity in Coca-Cola Co. weekly put options on Friday morning indicates some traders are positioning for shares in the world’s largest beverage maker to extend declines during the next five trading sessions. Shares in KO are off 1.7% today at $40.15 as of 11:35 a.m. ET. Options players bracing for the price of the underlying to continue to drop next week picked up in and out of the money puts on the stock this morning, purchasing more than 300 in the money calls at the Aug 02 ’13 $40.5 strike for an average premium of $0.42 apiece, and buying roughly 400 of the $40 strike weekly puts at an average premium of $0.20 each. The most actively traded Aug 02 ’13 expiry contracts by volume are the $39.5 puts, with more than 1,100 lots traded versus zero open interest. It looks like most of the $39.5 strike weekly puts were purchased at a premium of $0.15 each. The bearish trade makes money at expiration next week in the event that Coca-Cola Co.’s shares slide 2.0% from the current price of $40.15 to breach the effective breakeven point at $39.35 by expiration. Shares in the soda maker last traded below $39.35 back on June 25th.

HAL - Halliburton Co. – Shares in oilfield services provider, Halliburton Co., are in rally mode on Friday, up nearly 4.0% at $46.07 as of 11:45 a.m. ET, on news the company pleaded guilty to destroying evidence in the Deepwater Horizon oil spill in the Gulf of Mexico and prepared a $3.3 billion share buyback. Options traders gearing up for additional gains in Halliburton’s shares in the near term appear to be picking up weekly calls on the stock today. Call buyers looked to the Aug 02 ’13 $46.5 strike options, snapping up roughly 500 contracts for an average premium of $0.47 apiece. The contracts may be profitable at expiration next week should shares in HAL rise 2.0% from the current price of $46.07 to top the average breakeven point at $46.97. The most actively traded of the Aug 02 ’13 expiry options are the $47 strike calls, with more than 1,300 lots in play thus far in the session. Time and sales data suggests most of the volume was purchased in the early going for an average premium of $0.29 per contract. Traders long the $47 weekly calls stand ready to profit at expiration should Halliburton’s shares rise 2.8% to $47.29, the highest level for the stock since August of 2011.

 

Caitlin Duffy
Equity Options Analyst


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