Tags: Travelzoo | TZOO | stock | trading

Travelzoo Provides a Short-Term Trading Opportunity

Travelzoo Provides a Short-Term Trading Opportunity

By    |   Tuesday, 06 October 2015 07:40 AM

Some stocks are great for long-term investing and others are great for trading. Travelzoo (TZOO) should probably be thought of as a trading stock.
 
This global Internet media company could be attractive to some long-term investors with a high level of risk tolerance.

Travelzoo operates a variety of travel and entertainment web sites. Revenue topped $135 million in the past twelve months but is down from $158 million in 2013.

The Mountain View, California, company is expected to earn $0.18 a share this year, down almost 70 percent from a year earlier. Analysts are looking for slow earnings growth over the next few years. Speculative investors could consider owning a company like this but it might be better to look at trading opportunities in the stock.

Historically, TZOO has been one of the most volatile stocks in earnings season. On average, TZOO drops 10.4 percent in the week after announcing its earnings.

This quarter, TZOO is set to release its earnings on October 16. This is also the day October options will expire.

Traders can benefit from the probability of a sell off by buying a put. There is a $9 October put option expiring that day trading for about $0.50. Each option covers 100 shares of stock so this contract would cost $50 plus commissions and fees your broker charges. If TZOO declines by 10 percent, the put would deliver a gain of almost 100 percent.

A straddle, buying a put and call with a strike price of $9, should cost about $1 and traders should win if the stock moves in either direction by more than 10 percent. The risk of loss is lower with a straddle.

These are high risk trades with potentially high payoffs. They are also short-term trades and each one needs to be closed Friday, October 16, before the options expire.

(Disclaimer: no position.)

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MichaelCarr
Some stocks are great for long-term investing and others are great for trading. Travelzoo (TZOO) should probably be thought of as a trading stock.
Travelzoo, TZOO, stock, trading
310
2015-40-06
Tuesday, 06 October 2015 07:40 AM
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