Options Project Calm for Online Travel Stocks
31 October 2019 - 5:06AM
Dow Jones News
By Gunjan Banerji
Options traders are bracing for a relatively calm earnings
season for online travel stocks, despite big swings in shares of
individual companies this reporting season.
Projected swings for companies like Expedia Group Inc.,
TripAdvisor Inc. and Booking Holdings Inc. are hovering below the
average moves recorded in previous eight earnings releases, Goldman
Sachs Group Inc. analysts wrote in a Wednesday note.
For example, traders are betting on a roughly 4.9% swing up or
down for Booking stock, compared with the historical 7.1% move in
either direction. All three companies are due to report in early
November.
"We believe options prices on stocks in the online travel sector
are low ahead of earnings," the Goldman Sachs analysts wrote.
Options investors tend to project bigger moves in single stocks
than they end up recording, but the opposite is the case with these
online travel stocks. The lower-than-normal projections are
striking because this earnings season has been marked by some big
swings.
The average S&P 500 stock has moved up or down about 3.9%
following its earnings report this quarter, a bigger move than in
each of the past two quarters, the Goldman analysts wrote.
Correlations among stocks have also fallen lately as swings in
shares of individual companies have outpaced the broader markets,
according to Credit Suisse Group AG. The firm's analysts said this
week that they expect correlations to continue to drop.
"Relief rallies have dominated earnings this quarter," wrote the
Goldman analysts. Though earnings are poised to decline for this
quarter, they haven't been as bad as many thought they would be
after months of fears about a recession on the horizon.
That has made a strategy in which investors buy bullish options
that would pay out if stocks continue to lurch higher more
profitable than it had been in prior quarters, the analysts
wrote.
Write to Gunjan Banerji at Gunjan.Banerji@wsj.com
(END) Dow Jones Newswires
October 30, 2019 13:51 ET (17:51 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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