By Jud Pyle, CFA, chief investment strategist for the Options News Network

Right out of the gate this morning, at least one investor expressed bearishness and bought put options in Expedia ( EXPE) a couple weeks before the Internet travel company is scheduled to release its second-quarter earnings figures.

The investor bought approximately 15,000 Aug. 15 puts for around 90 cents per contract with the stock trading up 65 cents to around $16.50 a share. These puts closed last night at 88 cents. The investor needs EXPE shares to expire lower than $14.10 (the strike price minus the premium paid) come August expiration to make money on this trade, or they need the stock to drop enough prior to expiration so that they can sell out of the puts at a profit.

The fact that these puts are trading higher along with the stock tells us that it is likely a buyer driving the volume, and that implied volatility is higher. Last night the implied volatility was roughly 62 with the stock trading at $15.82 a share. But today's trades are closer to an implied volatility of 72. Normal daily options volume across all strikes in EXPE is approximately 2,500 contracts compared to the 23,000 options that have changed hands during the first two hours of trading today -- the majority of that volume accumulated in these Aug. 15 puts.

EXPE did not announce any significant news that catalyzed the heavy put-buying we saw this morning. It quite possibly could be an investor using the pop in the market today as a chance to protect some profits. EXPE shares have rallied more than 158% since their closing low for the year of $6.39 on March 9. Analysts expect the company to report a 10-cent increase in earnings per share to 31 cents a share later this month.

Investors should not interpret heavy put-buying as a reason to automatically sell EXPE shares. Bearish options activity could be a chance for long investors to take some profits before the company releases its second-quarter earnings report on July 30. For bullish investors, it presents a chance to sell premium if they believe the stock will finish above $14.10 at August expiration -- that would be a return greater than 6% for 38 days of risk.

For more heavy put buying activity, check out today's Sidewinder at

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Jud Pyle is the chief investment strategist for Options News Network ( and the portfolio manager of Options Alerts. Click here for a free trial for Options Alerts. Mr. Pyle writes regularly about options investing for
Jud Pyle, CFA, is the chief investment strategist for Options News Network. Pyle started his career in finance in 1994 as a derivative analyst with SBC Warburg. After four years with Warburg, Pyle joined PEAK6 Investments, L.P., in 1998 as an equity options trader and as chief risk officer. A native of Minneapolis, Pyle received his bachelor's degree in economics and history from Colgate University in 1994. As a trader, Pyle traded on average over 5,000 contracts per day, and over 1.2 million contracts per year. He also built the stock group for all PEAK6 Investments, L.P. hedging, which currently trades on average over 5 million shares per day, and over 1 billion shares per year. Further, from 2004-06, he managed the trading and risk management for PEAK6 Investments L.P.'s lead market-maker operation on the former PCX exchange, which traded more than 10,000 contracts per day. Pyle is the "Mad About Options" resident expert. He is also a regular contributor to "Options Physics."