YuuZoo Pact a Boon to Alibaba Group Holding Ltd (BABA) Option Bulls

Bullish option traders foresee Alibaba Group Holding Ltd (BABA) extending its run past $80

by Alex Eppstein

Published on Mar 30, 2016 at 10:45 AM
Updated on Jun 24, 2020 at 10:16 AM

Alibaba Group Holding Ltd (NYSE:BABA) has inked an agreement with YuuZoo Corporation to help it run the AliSports World Electronic Sport Games starting next month. The e-commerce stock has popped 1.1% on the news to trade at $78.93 -- a welcome sight for option bulls who have been eyeing the 80 strike.

Specifically, during the past 10 trading days, BABA has seen the biggest change in open interest at the April 80 call, which has added roughly 31,100 contracts. Based on data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), a large number have been bought to open -- suggesting traders foresee the stock toppling $80 by front-month expiration, at the close on Friday, April 15.

Taking a step back, short-term traders have displayed an extreme preference for calls over puts. BABA's Schaeffer's put/call open interest ratio (SOIR) stands at an annual low of 0.59 -- with calls nearly doubling puts among options expiring in the next three months.

Optimism is also reflected outside of the options pits. In fact, 83% of covering analysts rate BABA a "buy" or better, with not a single one handing out a "sell" opinion.

This glass-half-full approach makes sense in light of Alibaba Group Holding Ltd's (NYSE:BABA) rapid run higher. Since bottoming in February just below $60, the e-commerce stock has soared over 31%. What's more, during the past 40 sessions, BABA has outperformed the broader S&P 500 Index (SPX) by roughly 10 percentage points.

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