How to Play Priceline.com (PCLN) Ahead of Earnings
Priceline.com, Inc. bullish Credit Spread (NasdaqGS: PCLN)
TheOptionPlayer.com recommends a Priceline.com, Inc. (PCLN) short-term (7-day) bullish option strategy. Investors could simultaneously:
Sell the August week-one expiration PCLN $600 put for $3.55 (yesterday's closing price)
Buy the August week-one expiration $595 put at $2.65 (yesterday's close)
The difference between funds received and paid out is a .90 credit which we keep if Priceline.com closes above $600 on August 3rd, but immediately exit the position if it appears the price will end up lower. See Guidelines page at www.theoptionplayer.com/ for explanation on how trade is set up.
Why we recommend it:
Apparently, investors soured on all internet travel companies based on poor results reported by Priceline.com competitor TripAdvisor. TripAdvisor shares plunged 17% on Wednesday after announcing a revenue number that was less than analyst estimates. This news dragged down the stock of other travel companies including Priceline.com (down over 5% past few days). However, traders probably overreacted and as reported on The Motley Fool, Priceline.com remains a top performer. Pricline.com shares (NasdaqGS: PCLN) are already starting to recover nicely in Thursday after hours futures trading as the stock bounced off it's recent support level and should trade higher as investors anticipate earnings due August 7th. And as confirmed in the daily chart we expect recent support should hold above $620. At the very least there is a high probability that the price will remain above the $600 target for another week as it has not been that low since March.