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

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

May 5, 2015 at 2:03 PM
facebook twitter linkedin


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.

 

If you are not making money with options, you aren’t buying options like this…

There is no options strategy that more perfectly approaches trading the fastest moving and most volatile stocks available in the marketplace than this one. In fact, there is no strategy that better utilizes put options for optimal returns and a real trading edge over other traders in the exact same market. New options traders fail out at an incredible rate without proper trade research, execution timing, and option picking. Capitalize on Schaeffer’s 100+ years of options trading excellence with the most coveted product launch in company history. Don't waste another second... join us right now before the next round of trades are released!

Schaeffer's Investment Research Master Portfolio Trial
 


 


 
Special Offers from Schaeffer's Trading Partners