Schaeffer's Trading Floor Blog

SINA Corp (SINA) Losses Haven't Deterred Bulls

Option traders and analysts alike are upping the bullish ante on SINA

by 4/9/2014 12:21 PM
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SINA Corp (NASDAQ:SINA) has been struggling on the charts for practically all of 2014, with emerging concerns about the Weibo initial public offering pushing the shares further into the red. The stock is down nearly 35% year-to-date to its perch at $55.05, and has underperformed the broader S&P 500 Index (SPX) by more than 37 percentage points during the last 60 sessions. What's more, the shares continue to face downward pressure from their descending 10-day moving average. However, this woeful technical history isn't reflected in SINA's options pits.

Jumping into the details, the China-based online media firm has racked up a five-day call/put volume ratio of 2.50 on the International Securities Exchange (ISE) and Chicago Board Options Exchange (CBOE), with 13,243 calls bought to open versus 5,301 puts. From a wider perspective, that figure becomes even more top-heavy. Specifically, SINA's 50-day ISE, CBOE, and NASDAQ OMX PHLX (PHLX) call/put volume ratio checks in at 4.24, with more than four calls initiated for every put during the last 10 weeks. This reading ranks in the 84th percentile of its annual range, conveying traders have rarely bought to open calls (relative to puts) so quickly.

In a similar vein, SINA Corp's Schaeffer's put/call open interest ratio (SOIR) of 0.36 indicates call open interest nearly triples put open interest among options with a shelf-life of three months or less. The current SOIR is just 5 percentage points from a 12-month nadir, suggesting short-term traders are far more call-skewed than usual, relatively speaking. Suffice it to say, an unwinding of optimism in SINA's options pits -- particularly at out-of-the-money strikes -- could spell contrarian downside for the shares.

Surprisingly, option traders aren't the only ones expecting big things from SINA. On the Street, eight out of 12 covering analysts have assigned the stock a "strong buy" rating, compared to just three "holds" and one "sell" recommendation. Meanwhile, the shares' consensus 12-month price target sits at an astounding $89.41 -- or 62% above current levels. From a contrarian perspective, SINA Corp (NASDAQ:SINA) could be in for some analyst downgrades and/or downward price-target revisions, which could exacerbate the equity's losses.

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