Thursday, February 9, 2012

Expedia (EXPE) - Earnings Today; Order Flow Bets on a Move -- Possibly Bullish

EXPE is trading $33.89, up 0.7% with IV30™ up 19.9%. The LIVEVOL® Pro Summary is below.


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Expedia, Inc. is an online travel company. The Company makes available, on a stand-alone and package basis, travel products and services provided by numerous airlines, lodging properties, car rental companies, destination service providers, cruise lines and other travel product and service companies.

The company has earnings due out today, AMC. This is an order flow note ahead of that call. The company has traded over 29,000 contracts on total daily average option volume of just 2,613. Calls have traded on a 1.9:1 ratio to puts. The action has been in the Feb 35 calls where over 12,800 have traded. The Stats Tab and Day's biggest trades snapshots are included (below).

The Options Tab (below) illustrates that the Feb 35 calls are mostly opening (compare OI to trade size). The flow looks like mostly buyers, but there is a touch of ambiguity for sure. On a side note, look at the Feb 38 calls -- over 2,00 have traded and they all look like purchases. It is important to recognize that stock has already surpassed the daily average, so a bunch of these options might be going up tied to stock (so the delta is potentially muted or reversed... maybe).

The Skew Tab snap (below) illustrates the vols by strike by month.

We can see the front is elevated to the back -- but that's normal and expected. The Feb options essentially represent the volatility of the earnings reaction as they expire in less than seven trading days.

Finally, the Charts Tab (six months) is below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).

On the stock side, we can see the upward price evolution of late -- EXPE was in the high 20's a month ago and is now up more than 18% from those levels. It is a bit weird that the vol has reacted so abruptly today. Usually there's an orderly upward trend as earnings approach, but instead we see a ~20% pop right in front of the news.

It'll be interesting to see the results as the order flow reflects premium buyers (bets that the stock will move) and it feels like bullish order flow -- at least in part.

This is trade analysis, not a recommendation.

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