Buy Alert: April 8, 2013

| April 8, 2013

Buy Alert:  April 8, 2013

 

Trade Details

Buy OpenTable (OPEN) May 2013 $57.50 Puts for $1.75 or better

 

Why?

OPEN is one of those stocks that seems to be consistently overvalued or undervalued.  When it moves, it tends to move a lot more than necessary (in either direction).  This time, I believe OPEN is once again overvalued.

In case you aren’t familiar with OpenTable, the company provides online restaurant reservation services.  You may wonder how a restaurant reservation company could be valued at $1.5 billion by the market… and there are some legitimate concerns.

However, online reservations are a big thing in major metropolitan areas, and they continue to grow.  The problem is, OPEN has already grabbed the low hanging fruit.  Now, the company needs to grow internationally and into small US cities if they want to continue their rapid rate of growth.

But, the most obvious choice for international growth (Europe) is suffering a severe recession.  And, it’s a lot more expensive to pick up customers in small cities (fewer customers to reduce fixed costs).

As such, I think the recent price spike above the 20-day moving average isn’t going to hold.  Not to mention, we’re starting to see overall downward pressure on stocks.  If the market sells off, OPEN will almost surely go with it, as the business model is very much tied to economic growth.

Let’s grab the May $57.50 puts for our portfolio.

 

Recent Activity

OpenTable

 

Category: OTW Buy Alerts

About the Author ()

Marcus Haber is the co-editor of Options Trading Research and boasts well over a decade of real-life options experience. Learning from some of the biggest names in the business, Marcus has served as an Options Strategist for a number of firms and was also appointed to the Options Advsiory Board with Pershing, a branch of the Bank of New York.
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