Executive Exit Knocks Alibaba Group Holdings Ltd (BABA), Option Bulls

Alibaba Group Holding Ltd (BABA) is off sharply, despite the European launch of Alipay

by Alex Eppstein

Published on Apr 5, 2016 at 2:53 PM

Alibaba Group Holding Ltd (NYSE:BABA) is making headlines today. For starters, Re/code is reporting Jim Wilkinson, senior vice president for international corporate affairs, will leave BABA to start his own company. Separately, the China-based e-commerce concern is launching mobile payments app Alipay in Europe. Amid the news, BABA is down 1.9% at $77.61, potentially burning bullish options traders.

The stock's Schaeffer's put/call open interest ratio (SOIR) currently sits at 0.61, with calls handily outweighing puts among options with a shelf-life of three months or less. Additionally, this ratio ranks in the call-skewed 6th percentile of its annual range.

Digging deeper, among front-month options, the strike seeing the biggest increase in open interest over the past two weeks is the April 85 call -- adding nearly 8,900 contracts. In fact, a hefty 29,549 contracts are open at this out-of-the-money (OOTM) strike, which expires at next Friday's close. Based on data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), over 12,700 have been bought to open, suggesting option players have high hopes for BABA over the next two weeks.

Of course, it's a possibility that short sellers may be hedging their bearish positions by purchasing OOTM calls. After all, 9% of BABA's float is sold short, or 8.7 times the stock's usual daily trading volume.

On the charts, Alibaba Group Holding Ltd (NYSE:BABA) has performed well of late, outpacing the broader S&P 500 Index (SPX) by almost 15 percentage points over the past 40 sessions. Nonetheless, the stock remains at a roughly 4.5% year-to-date deficit, and is being slowed by resistance at its 60-week moving average.

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