Option Bears Turn Out for Alibaba Group Holding Limited (BABA)

Alibaba Group Holding Ltd's (BABA) weekly 3/13 83-strike put is popular today

by Karee Venema

Published on Mar 11, 2015 at 11:51 AM
Updated on Jun 24, 2020 at 10:16 AM

Similar to its U.S. peer Google Inc (NASDAQ:GOOGL), China-based e-commerce giant Alibaba Group Holding Ltd (NYSE:BABA) has set its sights on India. Specifically, the company is reportedly in talks to invest in India's online marketplace, Snapdeal. Additionally, the firm has enlisted two U.K. startups to finance trade operations for smaller companies. The news has done little to buoy BABA, with the stock down 1.3% at $81.88. Against this backdrop, puts are trading at 1.3 times what's typically seen, with a number of speculators betting on additional losses through week's end.

Drilling down, the equity's weekly 3/13 83-strike put has seen the most action, with 4,800 contracts on the tape. It appears new positions are being purchased, as traders roll the dice on BABA extending its decline south of $83 through Friday's close, when the weekly series expires. Delta on the put is docked at negative 0.66, suggesting a 66% chance the option will be in the money at expiration.

Today's uptick in put volume marks a change of pace in BABA's options pits. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), speculators have bought to open 1.76 calls for every put over the past 50 sessions. Echoing this call-skewed bias is the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.74.

Technically speaking, BABA has turned in a terrible performance in 2015, down 21.3%. What's more, the equity hit its lowest perch on record -- $80.03 -- on March 3. Looking ahead, Alibaba Group Holding Ltd (NYSE:BABA) could see some volatility next week, as its lock-up period is scheduled to expire on Wednesday, March 18.


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