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After a brutal two days for competitor TripAdvisor, shares of which have lost about 12% since the company’s Tuesday afternoon earnings report, options traders are now making bearish bets on Booking, expert Mike Khouw said Wednesday on CNBC’s “Options Action.”
“Booking Holdings has moved about 7% off earnings over the last eight quarters, on average, and that includes a decline of about 11% when they reported last quarter,” Khouw said. “The options market’s implying a slightly smaller move of about 6% when they report [Thursday], but the flow was fairly bearish.”
One particularly bearish trade was a purchase of the May 10 weekly 1660/1635 put spreads for roughly $5.75 each, said Khouw, who is co-founder and chief strategist of Optimize Advisors.
This is a bearish trade that targets a move in Booking to as low as $1,635 by May 10 expiration, or 5% lower by Friday.
“It looks like they would get about a 3-to-1 payoff if that 7% average move was to the downside,” he said. “And I think this makes a decent way to make a bearish bet here because, of course, the valuation on Booking Holdings is trading right now near historical lows, if you take a look over the past decade or so.”
But some, like Tim Seymour, founder and investment chief at Seymour Asset Management, think Booking’s low valuation represents an opportunity for investors.
It’s “near a trough valuation for a company that I think is largely executing,” Seymour, also a “Fast Money” trader, said on “Options Action.” “I think they have a better mix than, possibly, Expedia, especially when you consider that they have less exposure, I would say, to Europe. I like Booking here. I think the stock is a steady performer even if it’s not exciting.”
Booking’s stock continued to sink in midday trading Thursday, falling more than 1%.