Alibaba Group Holding Ltd (NYSE:BABA) dropped 3% yesterday to land at $105.52, bringing its month-to-date decline to 5.5%. Not surprisingly, puts traded at a 61% mark-up to the typical intraday pace.
Much of this activity can be traced to the January 2015 105-strike put, where a block of 5,200 contracts was exchanged in the morning, along with a matching lot of January 2015 105-strike calls -- creating a possible synthetic long position. However, it appears these contracts were tied to stock, clouding the speculator's motives.
A more straightforward play involved buy-to-open activity at BABA's January 2015 99-strike put. These traders are banking on continued downside in the shares through the close on Friday, Jan. 16, when the front-month options expire. Specifically, they're expecting the equity to settle below $99 at expiration -- a level that hasn't been breached since late October.
Elsewhere on the Street, the brokerage bunch is displaying extreme optimism toward Alibaba Group Holding Ltd (NYSE:BABA). All 22 covering analysts rate the shares a "buy" or "strong buy," and the stock's consensus 12-month price target stands in record-high territory, at $120.42. If BABA continues to struggle, a potential round of negative brokerage attention could intensify selling pressure.