Schaeffer's Trading Floor Blog

Qihoo 360 Technology Co Ltd (QIHU) Drop Doesn't Spook Option Traders

QIHU has succumbed to sector-wide pressure today

by 2/5/2014 1:54 PM
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Qihoo 360 Technology Co Ltd (NYSE:QIHU) is trading lower today, amid a sector-wide pullback. At last check, the equity was down 4.3% to linger near $92.25, after earlier dipping below the $90 mark for the first time since Jan. 27. Against this significant price move, overall option volume has jumped to 71% of its average intraday pace; however, calls are outpacing puts by a roughly 3-to-2 margin.

Today's call-skewed session is just more of the same in QIHU's options pits, though. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock has racked up a 50-day call/put volume ratio of 2.28, which ranks in the 80th percentile of its annual range. In other words, calls have been bought to open (over puts) at an accelerated clip in recent months.

In the front-month series, specifically, peak call open interest can be found at the now near-the-money February 90 strike, where the majority of the 1,908 contracts that reside here have been bought to open. Of note, peak put open interest also resides at the February 90 strike, and this heavy accumulation of contracts may be providing an options-related foothold for QIHU during today's pullback.

Elsewhere on the Street, sentiment toward QIHU is mixed. For starters, short interest jumped 34.2% in the last two reporting periods, and now accounts for a healthy 6.2% of the stock's available float. Still, it would take less than two sessions to cover, at the security's average daily trading volume.

Meanwhile, all but one of the eight brokerage firms following QIHU maintains a "strong buy" recommendation. Plus, the consensus 12-month price target of $93.80 stands at a discount to last night's closing price of $96.40.

Heading into today's pullback, the stock was sporting an impressive 204% year-over-year return. In fact, the equity hit its highest perch on record of $102.95 on Monday. In sector news, Bloomberg reported overnight that the estimated value of Chinese Internet issue Alibaba -- which is expected to go public sometime this year -- is roughly $153 billion. For the sake of comparison, Qihoo 360 Technology Co Ltd's (NYSE:QIHU) market capitalization stood at $11.3 billion as of last night's close.

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