A strategy idea for options trading investors.

With the S&P 500 Index up over 3.5% in the last four days alone, this week has been a veritable profit fest for the bulls. As is usually the case with a broad market surge most stocks participated in the bullish move with some capturing outsized gains. Apparently OpenTable (NASDAQ: OPEN) failed to make a reservation for the recent market rally as their stock is down over 4% for the week. Currently the stock sits on the precipice of an intermediate term support level at $73. A break of this line in the sand may trigger yet more selling pressure.

Unfortunately the options offered on OPEN leave much to be desired. The open Interest for any expiration cycle outside of August is meager. And even within August the options offer wide bid-ask spreads. The best I currently see is the OPEN Aug 75 Put trading at $6 by $6.30. Given the illiquid state of affairs, traders interested in placing a bearish bet in OPEN have a few choices:

1.  Avoid trading it altogether. Since the liquidity offered in OPEN options is poor, go find greener pastures.

2.  Trade the options using limit orders and try to split the bid-ask spread. If you are inclined to buy put options, the Aug 75 puts is currently one of the more liquid ones available. Instead of buying one at $6.30 (the current ask price), try to buy at $6.20 or $6.15.

3.  Stick with the underlying and simply short shares of stock.

OPEN reports earnings on August 2.

Source:  MachTrader

At the time of this writing Tyler Craig had no positions on OPEN.

Follow Tyler Craig on Twitter@TylersTrading.