ANGI – Angie’s List, Inc. – Shares in the online review site for local service providers are reeling this morning, down more than 16.5% to $17.50 in the early going, after the Wall Street Journal reported that the company lowered membership prices by around 75% in a few major markets to draw new members. The double-digit percentage decline in the price of ANGI shares sparked heavy trading in options on the stock straight out of the gate today.
Options volume on Angie’s List is currently running at four times the stock’s average daily volume, with around 18,000 options traded versus average daily options volume of around 4,500 contracts. Buyers of front month puts on the stock are prepared to benefit from further weakness in the price of the underlying during the next couple of weeks. More than 3,000 of the Oct $17.5 strike puts have traded thus far in the session versus open interest of just 188 contracts. Time and sales data suggests much of the volume was purchased for an average premium of $0.80 each. Buyers of the $17.5 puts may profit at expiration if shares in ANGI drop 7.0% from the current price of $18.00 to breach the average breakeven point on the downside at $16.70.
Finally, a three-legged options strategy initiated back on September 24th appears to have generated substantial profits for one bearish trader this morning. The strategist appears to have closed out a 1,000-lot Feb 2014 $17.5/$25 debit put spread that was originally purchased at a net premium of $2.95 per contract, in combination with buying to close 1,000 of the Feb 2014 $27.5 strike calls originally sold at a premium of $2.60 each. All told, the options trade initially cost a net premium of $0.35 per contract for all three legs and prepared the trader to make maximum profits in the event shares in ANGI dropped to $17.50 by February expiration.
Trading in these striking prices today indicates the options player likely closed the position at a significant gain; selling the put spread at a net premium of $5.10 each and buying back the calls at a premium of $0.55 apiece, resulting in total profits of approximately $4.20 per contract. The spread may have been established to insulate the trader from potential losses on a long position in the stock, or as an outright bearish bet that ANGI shares were due for a pullback.
