BABA Skyrockets After Founder Reemerges

Bulls are piling on the equity this morning

Assistant Editor
Jan 20, 2021 at 11:36 AM
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The shares of Alibaba Group Holding Ltd (NYSE:BABA) are up 4.9% at $264.04 this morning, following news that the company's founder Jack Ma made his first appearance in three months in a video on a Chinese social media site. Ma previously criticized China's financial regulator, which led to the plug being pulled on what was poised to be a record-setting initial public offering (IPO) for Ant Group -- another company Ma founded. He had not been seen since the comments, with some speculating that he had gone missing.

Today's news resulted in the equity clearing its 100-day moving average for the first time since a late-December bear gap. While BABA still has a ways to go before recapturing its Oct. 27 high of $319.32, the stock has already added 13.8% in 2021. Plus, it's set to notch its fifth-straight win today, should these gains hold. 

Meanwhile, shorts are hitting the exits at an alarming rate, yet there is plenty of pessimism left to be unwound that could push the security even higher. Short interest fell 13.6% in the last two reporting periods, and the 37.18 million shares sold short account for a healthy 11.4% of the stock's available float. 

BABA's options pits have been unusually call-heavy of late, per the equity's 10-day call/put volume ratio of 3.75 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio stands higher than 96% of readings from the past year, meaning calls are being bought a quicker-than-usual clip.

Today's options activity echoes this bullish sentiment, though there's ample put activity as well. Over 270,000 calls and 102,000 puts have already crossed the tape -- nearly double what's normally seen at this point, with volume pacing in the 99th annual percentile. Most popular are the March 280 call, followed by the weekly 1/22 270-strike call, with positions being opened at the latter. 

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