Options traders see a bigger-than-normal earnings move coming
Alibaba Group Holding Ltd (NYSE:BABA) is trading in the red today with the broader stock market, last seen down 2.7% at $159.56, with the Chinese e-commerce company preparing to report earnings before the open tomorrow, Aug. 15. Those bullish on BABA shares will be hoping for a performance similar to that last two times the firm released quarterly numbers, resulting in single-day swings of 1.6% and 6.3%.
Going back two years, Alibaba has averaged an after-earnings swing of just 3.3%. This time around, though, speculators are pricing in a much bigger move of 8.1% for tomorrow. That would mark the largest earnings move in more than eight quarters.
Looking at near-term options contracts, the September 175 call is actually home to peak open interest on BABA, while the front-month August 140 put is near the top, as well -- though this latter contract saw most trades cross at the bid price, hinting at sell-to-open activity. During the last 10 days in particular, the August 135 put saw the largest increase in open interest. On the whole, BABA's Schaeffer's put/call open interest ratio (SOIR) is 0.61, and ranks in the 29th annual percentile, so traders targeting options expiring within three months are somewhat more call-heavy than normal.
The stock did manage just pop yesterday thanks to strong quarterly results from fellow Chinese firm JD.com (JD), but Alibaba was rejected near the 200-day moving average. Prior to that, BABA shares topped out at the $180 level in late July. Their 52-week high is $195.21, touched on May 3.
