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Options eye higher highs for Expedia Inc; Downside puts in play on Masco Corp

Expedia Inc (NASDAQ:EXPE)  – Traders positioning for shares in the online travel site to continue to hit new highs stepped up to purchase bullish call options on Expedia this morning, with shares in the name trading up nearly 6% this morning at a new high of $60.29. Expedia shares are moving higher on Friday after the stock was raised to ‘Buy’ from ‘Hold’ with an increased target price of $68.00 at Deutsche Bank, and was rated new ‘Buy’ with a 12-month target share price of $64.00 at Cantor Fitzgerald. The stock, which has gained nearly 125% since Expedia, Inc. spun off its TripAdvisor unit last year, may have more room to run according to some options players today. Bullish strategists preparing for fresh highs in the near term purchased more than 2,000 calls at the Oct. $60 strike for an average premium of $2.23 apiece. Call buyers profit at expiration next month as long as Expedia’s shares increase another 3% to top the average breakeven price of $62.23.

Expedia Inc (NASDAQ:EXPE)

Masco Corporation (NYSE:MAS) – A large trade in Masco Corp. put options suggests one options player may be securing downside protection on the maker of home improvement and building products, as shares in the high-flying stock tack on another 2.5% today to secure a two-year high of $16.48. The purchase of a block of 40,000 puts at the Jan. 2013 $15 strike this morning for a premium of $1.10 apiece may be the work of an investor hedging a large position in the underlying shares, possibly to lock in gains enjoyed during the stock’s impressive 150% move higher since October 2011. Alternatively, the sizable stake in MAS puts could be an outright bearish bet on the stock, initiated in an attempt to benefit from a pullback in the price of the underlying during the next four months. Profits, or downside protection, kick in if shares in Masco Corp. drop 15.7% from today’s new high of $16.48 to breach the effective breakeven point at $13.90. The strategist may lose the full amount of premium paid to establish the position should Masco’s shares settle above $15.00 and the puts expire worthless at expiration next year.

OmniVision Technologies Inc. (NASDAQ:OVTI) – Shares in the maker of semiconductor imaging devices kicked off the final trading session of the week in positive territory, gaining as much as 3.8% to touch $16.22 this morning as hoards of Apple fans queue up to purchase the new iPhone 5. Despite the earlier hype, OmniVision’s shares turned negative to trade 0.65% lower on the session at $15.53 as of 12:05 p.m. ET. Options traders driving up volume in OmniVision calls today appear to be positioning for shares in the name to rally sharply during the next four weeks. The Oct. $18 strike call has changed hands more than 4,000 times against previously existing open interest of 3,517 positions, with much of the volume purchased for an average premium of $0.25 apiece. Traders long the $18 calls stand ready to profit at expiration next month in the event OmniVision’s shares surge 17.5% over the current price of $15.53 to top the average breakeven point at $18.25. Shares in OVTI last traded above $18.25 in May.

Caitlin Duffy
Equity Options Analyst

The material presented in this commentary is provided for informational purposes only and is based upon information that is considered to be reliable. However, neither Interactive Brokers LLC nor its affiliates warrant its completeness, accuracy or adequacy and it should not be relied upon as such. Neither IB nor its affiliates are responsible for any errors or omissions or for results obtained from the use of this information. Past performance is not necessarily indicative of future results.

This material is not intended as an offer or solicitation for the purchase or sale of any security or other financial instrument. Securities or other financial instruments mentioned in this material are not suitable for all investors. Any opinions expressed herein are given in good faith, are subject to change without notice, and are only correct as of the stated date of their issue. The information contained herein does not constitute advice on the tax consequences of making any particular investment decision. This material does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation to you of any particular securities, financial instruments or strategies. Before investing, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

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