The China Effect: Alibaba Group, Dangdang, Sohu.com

China's Shanghai Composite had its biggest one-day percentage drop in five months today -- sending the index near the brink of a bear market, and mainland-based U.S.-listed stocks into the red. Three notable names feeling the heat of China's steep sell-off are e-commerce concerns Alibaba Group Holding Ltd (NYSE:BABA) and E Commerce China Dangdang Inc (ADR) (NYSE:DANG), as well as gaming guru Sohu.com Inc (NASDAQ:SOHU). 

BABA is off 2.1% today to trade at $83.50. In addition to the broader bearish bias for China-based stocks, news that rival JD.com Inc (ADR) (NASDAQ:JD) is teaming up with ZestFinance to launch a credit-scoring service -- possibly creating competition for one of BABA's newest ventures -- may also be weighing on the shares. Regardless, today's negative price action is nothing new for the stock. Year-to-date, in fact, BABA has surrendered 20%.

Amid this decline -- and while BABA has been busy with a number of new undertakings -- optimism among options traders has been on the rise. In fact, since the start of June, Alibaba Group Holding Ltd's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio has risen to 4.36 from 3.40. Should the shares continue to struggle, a capitulation from some option bulls could translate into headwinds for BABA.

DANG has dropped 9% to $9.26 -- and is testing a foothold atop its 80-day moving average. After hitting its most recent low of $8.06 on June 2, the stock tried to stage a rebound, but was quickly contained by its 320-day moving average. Longer term, DANG is down 28% year-over-year.

On the sentiment front, skepticism is steep toward E Commerce China Dangdang Inc. Of the seven analysts covering the shares, six maintain a "hold" or "strong sell" suggestion. Meanwhile, short interest surged 36.4% in the latest reporting period to 3.6 million shorted shares. However, this pales in comparison to the record high 9.77 million shares that were sold short in December 2013. The stock could encounter a fresh wave of selling pressure, should short sellers continue to pile on.

SOHU, meanwhile, is off 5.4% at $60.92. Unlike BABA and DANG, SOHU has put in a strong technical performance in 2015. In fact, ahead of today's drop, the security was boasting a more than 21% year-to-date lead, and hit an annual high of $71.78 just two weeks ago.

Option traders, meanwhile, have shown a distinct preference for long calls over puts in recent weeks, per SOHU's 10-day ISE/CBOE/PHLX call/put volume ratio of 136.97 -- in the 98th annual percentile. Echoing this call-skewed backdrop is Sohu.com Inc's Schaeffer's put/call open interest ratio (SOIR) of 0.24, which rests lower than 76% of all similar readings taken in the past year. Simply stated, short-term speculators are more call-heavy than usual toward SOHU.