Baidu, Inc. (BIDU) Option Buyers Eye a Rebound

Baidu Inc (ADR) (BIDU) traders are buying long-term calls

by Griffin Kruse

Published on Apr 17, 2015 at 2:40 PM
Updated on Jun 24, 2020 at 10:16 AM

Options traders are targeting Baidu Inc (ADR) (NASDAQ:BIDU) today, as stocks slide in the wake of China's new trading rules. At last check, BIDU options were changing hands at double the intraday rate, with calls the contracts of choice.

One of the day's most active contracts is BIDU's September 280 call, where it appears buy-to-open activity is taking place. By purchasing this call at a volume-weighted average price (VWAP) of $1.27, speculators anticipate the shares to muscle their way north of $281.27 (strike plus VWAP) -- in uncharted territory -- by the close on Friday, Sept. 18, when the option expires.

Technically speaking, the shares of BIDU have marched steadily lower since hitting a Nov. 13 all-time high of $251.99, down 18.3% to linger near $205.98. Accordingly, sentiment in the options pits has been more bearish than normal, as BIDU's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 0.89 ranks in the 98th percentile of its annual range. Furthermore, the security's Schaeffer's put/call open interest ratio (SOIR) of 1.00 is higher than 80% of all equivalent readings taken over the past year, showing that near-term traders are more put-skewed than usual.

Looking elsewhere, Baidu Inc (ADR) (NASDAQ:BIDU) has been held in high-esteem by the brokerage bunch. Specifically, 11 out of 12 covering analysts rate the stock a "strong buy." Also, BIDU's consensus 12-month price target of $250.65 represents a 21.7% premium to current trading levels.

Daily Chart of BIDU Since April 2014

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