Bulls want to go places with Ctrip.com

By David Russell,

Shutterstock photo

Ctrip.com International has been consolidating after a big rally, and the bulls are piling in.

optionMONSTER's Heat Seeker monitoring system detected the purchase of 3,308 February 50 calls for $2.65. An equal number of February 55 calls was sold at the same time for $1.30, resulting in a cost of $1.35.

Owning calls locks in the price where a stock can be bought, while writing them obligates the investor to sell his or her position if a certain level is reached. Combining the two strategies lets them control a defined move, in this case from $50 to $55.

Their position will inflate to $5 if the Chinese online travel agency reaches the higher price, translating into profit of 270 percent.

A similar trade appeared on Dec. 30 in the January 55 and January 60 calls. See our Education section for more on the strategy, which is known as a bullish call spread .

CTRP fell 7.02 percent to $45.94 in afternoon trading, but is up 97 percent in the last year. It's been rallying along with other Chinese Internet companies as increased travel on the Mainland fuels growth.

A more cautious trade appeared an hour after the bullish call spread. This time the January 41 puts were sold and the January 60 calls were bought -- both against open interest -- while the February 41 puts were bought and the February 60 calls were sold. That indicates that a collar position was rolled forward in time as an investor looks to guard a long position in the stock.

Over 46,000 contracts have traded in CTRP so far today. That's more than 8 times average amounts, according to optionMONSTER data.

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

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

This article appears in: Investing Options
Referenced Stocks: CTRP

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