TraVolatility – PCLN, EXPE, TRIP

by Kristen October 19, 2012 1:41 pm • Commentary

With all of the volatility in internet related stocks today, the travel focused names, which have tended to be some of the more volatile issues are not only seeing a pick up in downward momentum, but implied vol is skyrocketing.

For example, PCLN is down 4% on no stock specific news, but a continuation of its down trend since early October. Q3 earnings are expected in the first week of Nov, and November at-the-money vol is trading around 46, which is high relative to its 30 day realized vol, but inline with historical pre-earnings patterns. The new Oct26 weeklies are trading 36 vol, which makes sense in that earnings are after expiry, but may be kind of low considering how stock has been moving and the brouhaha in techs these days.

Expedia (EXPE) is also down, almost 5% on the day. Their Q3 earnings are set for Oct 25th and atm implied vol is exploding. Nov at-the-money’s are trading 66 vol which is at the highs of the year, only reached at last earnings where stock jumped up almost $10.

Graph courtesy of LiveVol. Red is iv30


PCLN and EXPE are on our radar as they are 2 stocks that have had massive moves on earnings in the last cycle (PCLN down 17% and EXPE up 20%), options traders mis-priced these moves, it appears they will not be caught off-sides this qyr.

Another travel stock, Trip Advisor (TRIP) has had a lot of option activity, over 32K options have traded versus an average of less than 3K. Most of this has been a Nov 30/27 1×2 put spread, put on 9K times. There was over 12K interest in the 30 line. So it may have been selling to close on the 30 line and opening on the 27 line as it looks like it was a buyer on the 27 line. Trip reports earnings Oct 30th. November vol is trading in the mid 70’s which is quite high.


The jitters following GOOG’s premature earnings announcement are being felt throughout the online sector, and has heightened volatility throughout the market as a whole,  With spot VIX just now picking up, and the VIX futures curve so depressed out 6 and 9 months, we could be at the start of a new volatility regime.

In related recent commentary on Volatility in general, read Enis’s VIX snapshot.