Bears target Yelp before earnings

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Yelp reports earnings next week, and one investor is bearish ahead of the news.

optionMONSTER's Depth Charge monitoring system detected the purchase of about 1,000 August 18 puts for $0.94. Roughly the same number of August 16 puts were sold at the same time for $0.39, resulting in a net cost of $0.55.

The trade was probably a bearish put spread , which will earn a maximum profit of 264 if the consumer-review network closes at or below $16 on expiration.  (See our Education section for more on how to generate leverage using calls and puts.)

YELP is down 3.49 percent to $20.75 this morning, bucking the positive sentiment in the broader market. It's fluctuated mostly between $14 and $28 since going public in March.

Earnings missed expectations the last time results came out on May 2, but revenue and guidance were strong. The next release is scheduled for after the bell next Wednesday, Aug. 1.

Another possible explanation of today's activity is that the investor had previously sold the 18 puts, looking for YELP to hold that level, but has now rolled down to the lower strike. While less likely, it would also be bearish because the expected low was reduced.

Overall option volume in the name is triple the daily average so far today, according to the Depth Charge.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.


This article appears in: Investing , Options

Referenced Stocks: YELP

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