Open Table (OPEN) Options: Having a Great Plan and Not Executing

Open Table (OPEN) is a name that was soaring to start last week, and although it was on minimal volume and right back to resistance, I saw a lot of people playing this one long, or at least via the virtual Twitter trading account.



What I saw was that shares remained in a downtrend since very disappointing earnings last Quarter. You will see this a lot with shares attempting to take a run at the earnings gap, failing, and proceeding to new lows. The move was nothing more than a relief rally in a bloated stock, so that the smart money could short it at a higher price ahead of next quarter's results.

My thoughts were confirmed on July 5th, the day shares were up big, when I saw the options market making large bearish bets. I put out the following note to clients on July 5th:

OPTIONS RADAR: Bears Making Reservations at Open Table

Ticker/Price: OPEN ($87.20)

Analysis:
"Open Table (OPEN) with 1000 Aug. 80 puts bought here at $4.40, more than $580,000 in put premium on the day purchased, and then another 1000 bought at the $4 offer on the PHLX, now total of nearly $1M in put premium purchased versus $300,000 on call premium, buyers of volatility today with earnings set for early August, and a downward bias today. Shares are up 6.5% today, trading at its upper Acceleration and Bollinger Band, very overbought on RSI and Williams %R. Shares were hit hard last Quarter on earnings and valuation is very questionable at 49.2X earnings, 17.5X sales and 65.77X cash flow. There is a 20% short float in shares, and the momentum name may be forming the right shoulder of a head and shoulders pattern which could lead to a big move below $75. BofA reiterated a Buy and $120 target on May 11th, and OpCo raised to Outperform and a $115 target in May as well. The next resistance for optimal short entry may be at $90, the 38.2% Fibonacci."

Each day I put together around 10 of these Option Radar stories to focus on, the action I see as most unusual or significant in the options market. Along with the analysis I provide the trading strategy, if there is one. For Open Table (OPEN) I noted the following on that day:

Trading Strategy: I think shares could definitely see pressure into results with concerns from last Q, so if it gets to $90, the Aug. 80 puts are a nice trade in my view.

Open Table (OPEN) shares hit $90 that day and also the next two days, printing a high of $90.89 on July 7th, and the puts were pricing around $3.50.

As of today's close the puts are priced at above $7, so a 100% move in just less than a week.

A great move, but I failed to ever put in the order, so only a lesson, no hard cash to show for the great plan. Luckily, a few of my subscribers followed the trading strategy, which for me, is the number one priority!

At this juncture I do not want to chase the move, although I see it highly likely shares test $75 support in the coming days, and I could even see a move to $65 post-earnings, as competition is heating up, and International growth is lagging expectations.

Collins Stewart set a Buy and $108 target on July 8th, but I have seen some negative Analyst notes as well come out recently.