Priceline.com (NASDAQ:PCLN) is an online travel company that offers its customers a range of travel services, including airline tickets, hotel rooms, car rentals, vacation packages and cruises. The company provides online customers a choice between purchasing travel services in a traditional, price-disclosed manner or using its Name Your Own Price service, which allows its customers to make offers for travel services at discounted prices. The firm also offers financial services through Priceline Mortgage Company, which markets its products at pricelinemortgage.com.
Priceline.com has attracted some attention during the past few sessions in the wake of Interactive Corp's (NASDAQ:IACI) unexpected purchase of Ask Jeeves (NASDAQ:ASKJ) in a stock deal valued at nearly $2 billion. Apparently, investors believe there is potential for a merger/buyout of Priceline.com and the speculation has boosted the company's share price to a 9-month high. Our analysis suggests the issue is comfortable in a range from $22-24 and the recent buying support near the sold (put) strike at $20 provides reasonable downside margin for this bullish position. Traders should initially target a higher price ($0.35-$0.45 per contract) for the short option, to take advantage of any near-term consolidation in the underlying issue.
Fundamentals Chart Earnings Dates Analyst Ratings
Suggested (Bullish) Option Position:
Sell Put MAY 20.00 PUZ-QD
Target Price = $0.40 Open Interest = 69
Potential Profit (5 contracts @ $0.40) = $200
Initial Margin (5 contracts) = $2,705
Return on Investment (max) = 4.7%
Cost Basis in Stock = $19.60
Days to Expiration = 48