Struggling Chinese Stock Sees Post-Earnings Options Surge

The security is slipping even further below its year-to-date breakeven level

Digital Content Manager
Aug 30, 2022 at 10:21 AM
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Chinese tech name Baidu Inc (NASDAQ:BIDU) entered the earnings confessional this morning to report an earnings and revenue beat. Recovering ad sales and stronger demand for cloud-based offerings contributed to these results. However, news that regulators have chosen sector peer Alibaba (BABA) for an audit inspection next month is distracting from BIDU's upbeat earnings report, and at last check, the stock was down 6.6% to trade at $137.59.

Analysts maintain a bullish stance towards the security, with seven of the 10 in question rating it a "strong buy," while three carry a tepid "hold" rating. What's more, the 12-month consensus target price of $197.51 is a whopping 38.8% premium to the equity's current perch.

A ceiling at the $156 level, which has been stifling the shares since March, came into play again on Friday to stop the stock's latest rally off the $127 region. As a result of today's dip, the stock is slipping further below its year-to-date breakeven level, with a nearly 8% deficit.

Options traders are hitting the security in droves today. So far, 16,000 calls and 6,385 puts have crossed the tape, which is 12 times what's typically seen at this point. Most popular is the September 150 call, followed by the weekly 9/2 150-strike call, with positions being opened at both.

Short-term options traders have been bullish towards Baidu stock of late. This is per the security's Schaeffer's put/call open interest ratio (SOIR) of 0.59, which ranks higher than just 9% of readings from the past year.

 

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