Traders pull back from HomeAway

By David Russell,

Shutterstock photo

HomeAway generated massive gains for traders last month, but now they apparently think that the party is over.

optionMONSTER's Heat Seeker monitoring program detected unusual call buying in the heavily shorted time-share company earlier this year. First , they bought the March 25 calls for $0.55, then watched them expand to $1.45. Shortly after they came back to the April 30 calls, which more than tripled from about $1 to over $1.

In yesterday's session, an investor took the opposite side of the trade: More than 2,700 May 30 calls were sold for $2.05 against open interest of 102 contracts. This time instead of locking in the price where shares can bought, the trader agreed to sell them if they go above $30 by expiration. (See our Education section for more on the strategy.)

AWAY declined 3.8 percent to $30.35 yesterday. It went public for $27 in June 2011, then fell to $20 and spent the next year bouncing along that level. The stock has been more bullish since December, surging more than 50 percent through late last month. The last earnings report on Feb. 20 also beat expectations, fueling a big jump in the share price.

Yesterday's call selling reflects a belief that further upside will be limited over the next 1-1/2 months. The investor probably owns shares and is using the options to hedge their position. He or she has now effectively locked in a sale price of $32.05 if it holds current levels.

More than 4,900 AWAY options changed hands in the session, 5.5 times its daily average.

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: AWAY

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