YELP – Yelp Inc. – Shares in the operator of a website that allows consumers to search for and review local businesses jumped 24% today to a record high of $51.80 after the company reported higher than expected second-quarter revenue after the close on Wednesday and forecast third-quarter sales above the average analyst estimate. Bullish options purchased yesterday ahead of the earnings report are generating sizable gains for some traders today. Of note, trades initiated in the Aug $50 strike calls during the final hour of the trading session on Wednesday. Open interest in the Aug $50 calls increased by roughly 650 contracts overnight, and it looks like much of the volume was purchased for between $0.55 and $0.60 apiece. The sharp rally in the stock today now finds the $50 calls trading at $2.60 each, or approximately four times as much, as of midday in New York. The Aug $50 strike call options are the most traded contracts by volume on Yelp thus far in the current session, with around 2,700 lots in play versus open interest of 1,271 contracts. Time and sales data indicates mixed activity during the first half of the trading day; perhaps some sellers are taking profits while buyers of the options position for shares in Yelp to extend gains in the near term. Overall volume in YELP options is approaching 17,000 contracts as of midday, a level that is nearly four times the stock’s average daily options volume of around 4,300 contracts.
TRLA – Trulia, Inc. – The provider of apps and online tools for homebuyers and the real estate industry reported better than expected second-quarter results and forecast third-quarter revenue above consensus estimates after the close on Wednesday, sending shares in Trulia up as much as 24% on Thursday morning to a record high of $46.23. Buyers of Trulia call options ahead of the earnings release are seeing big overnight gains in the value of their positions. The largest rise in call open interest ahead of earnings was in the Aug $40 strike calls, which rose by approximately 775 contracts. A review of time and sales data from Wednesday suggests most of the calls traded yesterday were purchased for an average premium of $1.51 apiece. Call buyers now find the Aug $40 strike calls changing hands at $5.40 each as of 11:15 a.m. ET on Thursday. Overall volume of close to 4,000 contracts on Trulia this morning is roughly eight times the stock’s average daily volume of close to 500 contracts.
CTRP – Ctrip.com International, Ltd. – Shares in the provider of travel services in China are soaring today, gaining more than 25% in the early going to touch a two-year high of $45.99 after the company reported second-quarter profit and sales that handily beat analyst estimates. The sharp move in the price of the underlying sparked heavier than usual trading traffic in Ctrip.com options, with overall volume nearing 9,000 contracts just before 10:45 a.m. ET versus the stock’s average daily reading of around 4,300 contracts. Most of the volume is concentrated in front month call and put options, with sizable fresh interest in the Aug $45 strike puts and the Aug $46 strikes calls. The August expiry call options also attracted heavier than usual volume prior to the earnings release. Notably, one trader appears to have initiated a large bullish position on the stock ahead of yesterday’s earnings report after the close. It looks like the trader initiated a one-by-two ratio call spread on Tuesday afternoon, buying 4,000 calls at the Aug $39 strike for a premium of $1.40 each, and selling 8,000 calls at the Aug $42 strike at a premium of $0.55 each. Net premium paid to establish the spread amounted to $0.30 per contract and positioned the trader to profit above a breakeven share price of $39.30, with maximum possible gains of $2.70 per contract in the event of a move up to $42.00 a share by August expiration. The double digit percentage move in Ctrip.com’s shares today blew straight through $42.00, but with the stock currently at $42.86 (as of 11:00 a.m. ET), shares are below the $44.70 level at which the position loses money at expiration.