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Bearish Options On Vail Resorts Pay Off For Some Traders As Shares Slide

 December 04, 2012 03:25 PM
 


MTN - Vail Resorts, Inc. – Shares in ski resort operator, Vail Resorts, Inc., dropped sharply on Tuesday after the company posted a larger-than-expected first-quarter loss and warned it may miss its projected earnings target for the year. The stock currently trades down 9.2% on the day at $50.70 as of 11:00 a.m. in New York, the lowest level since August. Rising open interest levels and a review of time and sales data for transactions in MTN front-month put options on Monday indicates some strategists were anticipating the stock may pullback after earnings. Bearish players appear to have purchased around 200 puts at the Dec. $52.5 strike for an average premium of $0.65 each and more than 350 put options at the Dec. $55 strike at an average premium of $1.48 apiece. Traders prepared for Vail Resorts to hit an icy patch find the value of their contracts have more than tripled overnight, with premium on the $52.5 and $55 strike contracts rising to $2.50 and $4.60 apiece, respectively, as of 11:15 a.m. ET on Tuesday morning. Finally, traders also appear to be selling upside calls on Vail, with around 225 of the Dec. $57.5 strike calls hitting the bid price of $0.05 in the early going.

[Related -Weaker Earnings Will Result In Higher Corporate Default Rates; "Zombie Companies" Yet To Be Hit]

TRIP - TripAdvisor, Inc. – Shares in online travel company, TripAdvisor, Inc., are on the decline today, trading down 3.75% at $36.28 as of 11:30 a.m. ET. Upside call buying on the stock, however, suggests some strategists are positioning for the price of the underlying to rebound ahead of December expiration. Options volume on TRIP today is greatest in the front month calls, with heavy trading traffic in the $38 and $39 strike contracts. Traders exchanged some 1,400 call options at the Dec. $38 strike and another 1,100 lots at the higher Dec. $39 strike. It looks like most of these calls were purchased earlier in the trading session at average premiums of $0.65 and $0.40 apiece, respectively. Traders long the $38 strike calls stand ready to profit at expiration in the event that TRIP's shares rally at least 6.5% over the current price of $36.28 to surpass the average breakeven point at $38.65, while buyers of the $39 strike calls require a minimum 8.6% upside move in the stock price in order to breakeven at $39.40 by December expiration. TRIP's shares are down more than 30% off a 52-week high of $47.81, but are up nearly 40% since the start of 2012. Options volume in excess of 4,800 contracts before midday on TripAdvisor is noteworthy given the stock's average daily options volume of around 1,860 contracts.

[Related -Futures Mixed Amid Jobless Claims Data, Earnings; Facebook, Inc. (FB) Soars]

CS - Credit Suisse Group – Call options on financial services group, Credit Suisse, are active today as shares in the name rally to their highest level since mid-October. The stock is currently hovering near session highs, up 2.25% on the day at $24.15 as of midday in New York. In-the-money calls are the most active contracts on CS today, with around 4,100 lots in play at the Jan. 2013 $23.97 strike versus previously existing open interest of 907 contracts. It looks like most of the volume was purchased in the first 30 minutes of the session for an average premium of $1.13 apiece. Call buyers may profit at expiration should shares in Credit Suisse rally another 4% over the current price of $24.15 to exceed the average breakeven point at $25.10.

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