Alibaba Stock Boosted By Ant Financial Buzz

Put buying has actually been unusually popular on BABA in recent weeks during the market turbulence

Managing Editor
Apr 10, 2018 at 9:47 AM
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Alibaba Group Holding Ltd (NYSE:BABA) is up 2.6% to trade at $174.35 this morning, after The Wall Street Journal (subscription required) reported that founder Jack Ma's Ant Financial is planning to raise $9 billion in its latest round of private funding. Back in February, Alibaba announced plans to take a 33% stake in Ant Financial.

The news has Alibaba stock trading back above its year-to-date breakeven level, as well as back near the 200-day moving average, a trendline that had served as support but was breached last week amid the broad-market pullback. Despite the equity's struggles lately, it's still up almost 58% over the past year.

A short squeeze could send BABA stock higher. Short interest fell by 1.4% in the last two reporting periods, yet the 122.61 million shares sold still represents 10% of the stock's total available float. At BABA's average daily trading volume, this is nearly seven days of pent-up buying demand. 

Although calls have outnumbered puts on an absolute basis in recent weeks, puts have become unusually popular. BABA sports a 10-day put/call volume ratio of 0.67 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) -- in the 100th percentile of its annual range, meaning puts have been bought to open at a much faster-than-usual rate relative to calls.

Finally, Alibaba stock sports a Schaeffer's Volatility Scorecard (SVS) of 91 out of 100. This indicates that the e-commerce name has handily rewarded premium buyers over the past year, often exceeding options traders' volatility expectations.

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