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JD.Com Inc (JD) Option Buyers Strike While the Iron's Hot

JD.Com Inc (ADR) (NASDAQ:JD) near-term options are relatively inexpensive at the moment, historically speaking

Jun 8, 2016 at 2:26 PM
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JD.Com Inc (ADR) (NASDAQ:JD) is down 2.6% at $21.44 -- fresh off a two-year low of $21.30 -- as disappointing export data out of China pressures U.S.-listed mainland stocks. Meanwhile, in the options pits, volume is running at 1.4 times what's typically seen at this point in the day on JD stock, with puts and calls crossing in near tandem.

On the put side, options traders appear to be selling to close their in-the-money August 23 strikes -- a healthy portion of which were bought to open yesterday for a volume-weighted average price of $2.15. At last check, the bid price on these puts was $2.55.

Meanwhile, more optimistic options traders may possibly be purchasing new positions at JD's January 2018 30-strike call -- the stock's most active option -- and the June 21.50 call. If this is the case, the goal is for JD to topple the strike prices by the close on the respective expiration dates, the latter of which is next Friday, June 17.

More broadly speaking, put buying has been picking up speed in JD's options pits of late. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), for instance, the stock's 10-day put/call volume ratio has jumped to 0.69 from 0.19 over the past two weeks. What's more, the current ratio ranks in the bearishly skewed 76th annual percentile.

Elsewhere, JD's Schaeffer's put/call open interest ratio (SOIR) of 0.92 rests just 10 percentage points from a 52-week peak. Simply stated, short-term traders are more put-heavy than usual among options slated to expire in three months or less.

Regardless of whether options traders are buying to open calls or puts, the stock's near-term contracts are relatively inexpensive at the moment. Not only does JD's Schaeffer's Volatility Index (SVI) of 43% rank in the low 14th annual percentile, but its 30-day at-the-money implied volatility of 42.4% arrives in the 26th percentile of its 52-week range -- two indications of low volatility expectations for JD.Com Inc (ADR) (NASDAQ:JD).

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