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Bulls want to go places with Ctrip.com

Posted
1/3/2014 1:12:00 PM
By: optionMONSTER
Referenced Stocks:CTRP

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.