Since the calendar flipped to March, Expedia EXPE – NASDAQ has taken off, up 9.2% including 10 straight winning sessions. After jetting higher, whoever sold to open 20,000 EXPE April 125 puts today expects shares to taper off.
For this trade to pay off, EXPE doesn’t have to rise — it just can’t lose more than 4.5%. Each put option was sold for $0.95, putting the break-even price at $124.05. As long as EXPE stays above this threshold by expiration a month from now, our trader stands to collect the full premium of $1.9 million.
Below this level, however, he’ll lose $2 million for every $1 EXPE drops. Positions of this size rarely lose, so look for EXPE to close north of $125.00 on April 21.
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