EXPE – Expedia, Inc. – Online travel company Expedia, Inc.’s shares have been on a tear this year. The stock jumped 28% today to hit $58.40 after the company reported higher-than-expected revenue for the second quarter and boosted its quarterly dividend to $0.13 a share. The huge upside move in the stock today lifted Expedia’s gains to 95% for the year so far and spurred heavier-than-usual trading in EXPE options. Traders positioning for the price of the underlying to hit fresh highs snapped up $60 strike calls expiring in August and September this morning, while other strategists appear to be taking profits on bullish strategies initiated ahead of the earnings report. Upside call buyers looked to the Aug. $60 strike where more than 1,700 lots are in play versus previously existing open interest of 308 contracts. Traders driving volume in the $60 calls purchased most of the contracts for an average premium of $0.85 each and stand ready to profit at expiration should shares rally 9% over the current price of $56.00 (as of 12:37 p.m. ET) to settle above $60.85 by expiration. The Sept. $60 strike call is also active today; volume is above 1,800 contracts at present against zero open positions. The most heavily traded calls on Expedia today are the Aug. $50s; volume currently exceeds 10,600 contracts versus open interest in excess of 18,300 contracts. Open interest in the contracts increased sharply this week ahead of earnings as buyers positioned for an approximate 10% move higher in the shares. A far larger upside move than anticipated has the contracts deep in-the-money and it appears some traders may be taking profits off the table. Premium on the Aug. $50 calls this week was between $1.05 and $1.60 per contract; the sale of more than 5,800 contracts this morning for an average premium of $5.31 apiece suggests some strategists may have walked away with substantial gains in hand.
AMGN – Amgen Inc. – Shares in the world’s largest biotechnology company rose 4% to a new six-year high of $82.50 this morning after the drug maker posted better-than-expected second-quarter earnings and raised its full-year profit forecast. Options activity on Amgen today suggests some traders expect the price of the underlying to push higher still in the near term. Bullish bets are building in the Aug. $85 strike call where 2,400 contracts were purchased for an average premium of $0.54 apiece. Traders long the calls stand prepared to profit at expiration in the event Amgen’s shares rally another 3.7% to top the average breakeven price of $85.54. Similar strategies marked activity in the September expiry options, with the $85 strike call trading upwards of 2,500 times versus open interest of 129 contracts. Most of the Sept. $85 calls appear to have been purchased for an average premium of $1.19 each. Trading traffic in far out-of-the-money call options expiring in October caught our eye as well. It looks like one or more traders snapped up more than 200 of the $87.5 and $95 strike calls at average premiums of $1.12 and $0.20 apiece, respectively. The $95 strike calls may be profitable if shares in Amgen can manage to gain more than 15% in the 12 weeks remaining to October expiration. The stock was upgraded to ‘Overweight’ from ‘Neutral’ with a 12-month target price of $95.00 at Piper Jaffray today.
GDOT – Green Dot Corp. – Investors in the provider of reloadable prepaid debit cards took a big hit today with shares in Green Dot Corp. more than halving in value overnight after the company lowered its 2012 revenue forecast. The stock fell 60% to an all-time low of $9.17 and was met with a barrage of analyst downgrades on Friday following Thursday’s second-quarter earnings report. Increasing open interest levels in front month put options ahead of the report may have provided much-needed downside protection, or potentially massive gains, for some traders. The Aug. $20, $22.5 and $25 strike puts were active this week. It looks like buyers stepped in to pick up 750 of the $25 strike put, around 300 of the $22.5 strike put and 180 lots at the $20 strike. The meltdown in GDOT shares today has taken premiums on these contracts up from single-digit price tags paid by buyers earlier in the week to double-digit values. For example, the $0.35 per contract one or more traders shelled out to get long 180 of the Aug. $20 strike put yesterday is tiny relative to the last traded price on the contracts today at $10.00 apiece. Options volume on Green Dot is up big overall on the session, with 7,650 contracts in play versus the stock’s average daily volume of 206 contracts.