Baidu, Inc. (BIDU) Option Traders Brace for More Downside

Baidu Inc (ADR) (NASDAQ:BIDU) put volume is nearing peak levels

by Karee Venema

Published on May 5, 2015 at 2:03 PM
Updated on Jun 24, 2020 at 10:16 AM

A handful of China-based Internet issues received negative analyst attention today, and for Baidu Inc (ADR) (NASDAQ:BIDU), this meant a downgrade to "neutral" from "overweight" and a price-target cut to $215 from $240 at J.P. Morgan Securities. As a result, shares of BIDU are 4.7% lower at $194.09, and put volume has popped to 1.6 times what's typically seen at this point in the day.

One of the more active options is BIDU's weekly 5/8 200-strike put, where it appears a portion of the activity is of the buy-to-open kind. In other words, speculators expect the stock to continue its retreat from the round-number $200 mark through this Friday's close, when the series expires. Amid today's drop, delta on the put has moved to negative 0.81 from negative 0.25 at last night's close, indicating an increased probability of an in-the-money finish.

Widening the sentiment scope reveals option traders have been buying to open puts over calls at a faster-than-usual clip of late. Specifically, the equity's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 0.77 ranks in the 90th annual percentile.

Outside of the options arena, the outlook for BIDU is more upbeat. Of the 13 analysts covering the shares, 11 maintain a "strong buy" recommendation, with not a single "sell" to be found. Plus, the average 12-month price target of $246.36 stands at a 27% premium to current trading levels. Should Baidu Inc (NASDAQ:BIDU) widen its nearly 15% year-to-date deficit, another round of bearish brokerage notes could pressure the shares even lower.


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