Alibaba Group Holding Limited (BABA) Ascent Attracts Short-Term Bulls

Are Alibaba Group Holding Ltd (BABA) option players predicting an earnings win?

Jan 21, 2015 at 1:53 PM
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The shares of Alibaba Group Holding Ltd (NYSE:BABA) are gaining ground today, up 3.4% at $103.49. Against this backdrop, option bulls are placing bets at an accelerated rate, with short-term calls in demand. Intraday call volume is running at 1.7 times the typical rate, and the stock's 30-day at-the-money implied volatility has surged 6.4% to 36.9%.

Nine of the 10 most active options are calls, and it looks like buyers are initiating positions at the February 105 call. The option will be in the money if BABA topples $105 by the close on Friday, Feb. 20, when the newly front-month options expire -- which encompasses the company's earnings date next Thursday, Jan. 29.

Today's affinity for bullish bets is just more of the same for one of the hottest Wall Street freshmen of 2014. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have bought to open about 1.7 calls for every put during the past two weeks. Likewise, the equity's Schaeffer's put/call open interest ratio (SOIR) of 0.73 indicates that short-term calls outnumber their put rivals.

Thanks to today's ascent, Alibaba Group Holding Ltd (NYSE:BABA) is on pace to end atop both its 10-day and 20-day moving averages for the first time since Dec. 22. Still, the security remains 13.8% south of its all-time high of $120, tagged in mid-November. Off the charts, Alibaba is flexing its pocketbook; the company yesterday said it would invest in start-up Visualead, which specializes in QR code technology, and is reportedly considering a stake in state-run New China Life Insurance.

Daily Chart of BABA since November 2014 with 10-Day and 20-Day Moving Averages
 

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