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Barry Diller Chatter Ups EXPE

Written By Brian Hicks

Posted May 28, 2008

Welcome to The Options Pit blog. Our goal is to keep you up to date on hot options activity, and stock options to keep on radar.

Keep an eye on Expedia (EXPE). It’s rocketing higher on chatter that Barry Diller is looking to take the company private. The June 25 calls are seeing heavy interest with 9,467 contracts trading hands, as compared to open interest of 6,467. The June 22.50s are seeing interest, too, with 3,260 contracts traded, as compared to open interest of 1,531.  While call activity may indicate bullishness, be cautious of following the rumor.

Coca Cola Enertprises (CCE) is another one for the radar screen. You know things have gone economically awry when people aren’t buying Coke any one. The company just reported that trends have "continued to limit volume performance in North America, particularly in higher margin 20-oince packages of sparkling beverages and water, negatively affecting operating income."

Given the news, the company now expects a mid- to high-single digit decline in Q2 comparable EPS, as compared to Q2 2007. So, it comes as no surprise that put option activity has begun to build, as the stock attempts to hold multi-year $20 support. A break at $20 could take CCE to at least $19 near-term.

July 2008 20 put options last saw 1,003 contracts traded, as compared to 940 open interest (OI). August 2008 20 put options last saw 700 contracts traded, as compared to 40 OI.

"We are taking action to meet the persistent challenges created by these weakening economic and marketplace conditions in the US, including initiatives to strengthen cold drink sales, increase revenue, and reduce expenses," said John Brock, chairman and CEO. "We are entering the key summer selling season, and the net impact of these initiatives against the background of the uncertainties in the marketplace remains unclear."

And while CCE does expect to report full year 2008 earnings guidance of $1.50 to $1.55, it could be challenging if economic and market trends fail to improve.

Good Investing,

Ian L. Cooper