Stock Options Watch: BIDU, TZOO, ANN

BIDU – Baidu, Inc. – Shares in Baidu are rising for a fourth-consecutive trading session, rising as much as 4.6% during morning trading to $101.26, the highest level in more than one month. One options strategy initiated on the Chinese language Internet search provider today appears to indicate that one trader is bracing for the price of the underlying to potentially surrender recent gains this week. It looks like the trader purchased a bear put spread, buying 1,823 puts at the Jul 19 ’13 $97.5 strike at a premium of $0.77 each, and selling the same number of puts at the Jul 19 ’13 $87.5 strike for a premium of $0.02 apiece. The net cost of the trade amounts to $0.75 per contract. The position potentially becomes profitable if shares in BIDU decline 3.4% from the current price of $100.15 to settle below the effective breakeven price of $96.75 at expiration. Maximum potential profits of $9.25 per contract are available on the spread should shares plunge 12.6% to $87.50. Shares in Baidu last traded below $87.50 in May. Baidu is scheduled to report second-quarter earnings after the closing bell next Wednesday.

TZOO – Travelzoo, Inc. – Trading in Travelzoo options this morning suggests some traders are positioning for shares in the name to continue pushing to the upside in the near term. Shares in the online publisher of travel and entertainment deals rallied as much as 8.3% today to a new 52-week high of $32.39, with just two full trading sessions remaining before the company’s second-quarter earnings report prior to the opening bell on Thursday. Options traders believing that the stock has substantially more room to run during the next four weeks purchased more than 250 calls at the Aug $35 strike for an average premium of $0.52 apiece. The bullish strategy pays off at expiration next month if shares in Travelzoo jump 10% over today’s high of $32.39 to top the average breakeven price of $35.52. Shares in Travelzoo last traded above $35.52 back in September of 2011.

ANN – ANN INC. – Bearish options are changing hands on apparel retailer, ANN INC., today, with shares in the name down 2.8% on the session to stand at $33.59 as of 12:15 p.m. ET. The most actively traded contracts by volume at present are the Aug $32 strike puts, with upwards of 3,200 lots in play versus open interest of 149 contracts. Time and sales data indicates most of the puts were purchased during morning trading for an average premium of $0.72 apiece. Put buyers may profit at expiration next month in the event that ANN’s shares drop nearly 7.0% from the current price of $33.59 to breach the average breakeven point on the downside at $31.28. Shares in ANN, INC. last traded below $31.28 at the end of June. The retailer reports second-quarter earnings in mid-August.

About Caitlin Duffy 373 Articles

Affiliation: Interactive Brokers

Caitlin Duffy joined Interactive Brokers in 2009. In her role as Equity Options Analyst, Caitlin provides daily market commentary; highlighting various options trades, trading patterns and strategies of interest. Through Interactive Broker's webinar program, Ms. Duffy presents a number of educational, options-related events describing the theoretical pricing of options, the option Greeks as well as options strategies.

Interactive Brokers: Interactive Brokers offers direct market access to around 80 electronic global markets from a single account. Successful traders and investors understand that superior technology and lower trading costs can result in greater returns. For 32 years we have been building direct access trading technology that delivers real advantages to professionals worldwide. With consolidated equity capital of US $4.4 billion, IB and its affiliates exceed 1,000,000 trades per day. In addition, our prudent and conservative risk policies make Interactive Brokers a safe haven for your money. Discover some of the reasons why IB, the largest independent US broker/dealer, is the professional traders' and investors' choice.

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