Bulls Blitz Alibaba Group Holding Limited (BABA) Amid Sector Rally

Alibaba Group Holding Ltd (BABA) calls are trading at two times the average intraday pace

by Karee Venema

Published on Apr 8, 2015 at 12:49 PM
Updated on Apr 20, 2015 at 5:32 PM

A sector-wide rally in Chinese Internet names has Alibaba Group Holding Ltd (NYSE:BABA) higher this afternoon. At last check, the shares were up 3.9% at $85.38, and options traders were responding in kind. Specifically, calls are crossing the tape at two times the average intraday rate, and outpacing puts by a 2-to-1 margin.

Most active is BABA's April 85 call, where it appears some speculators may be purchasing new positions. Meanwhile, more clear-cut buy-to-open activity is occurring at the equity's weekly 4/10 85- and 85.50-strike calls. For those initiating long calls, the goal is for the security to settle north of the strikes at the respective expirations of Friday, April 17, and Friday, April 10.

From a wider sentiment perspective, today's call-skewed session just echoes the withstanding trend. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have bought to open 1.87 BABA calls for every put over the past 10 sessions. Echoing this is the equity's Schaeffer's put/call open interest ratio (SOIR) of 0.78, which indicates call open interest outweighs put open interest among options expiring in three months or less.

This optimism is witnessed outside of the options pits, as well, despite BABA losing ground both on and off the charts. All 23 analysts covering the shares maintain a "buy" or better rating, while the average 12-month price target of $109.83 stands at a 28.6% premium to current trading levels. Technically speaking, Alibaba Group Holding Ltd (NYSE:BABA) has shed 29% since hitting a record peak of $120 in mid-November.


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