Weibo Corporation (WB) Speculators Expect Extended Gains

Weibo Corp (ADR) (NASDAQ:WB) traders have been buying to open calls over puts at an extreme rate lately

by Alex Eppstein

Published on Jun 3, 2015 at 2:39 PM
Updated on Jun 3, 2015 at 2:39 PM

Traders have been buying to open Weibo Corp (ADR) (NASDAQ:WB) calls over puts at an extreme pace of late, per data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Over the last 10 days, roughly 4,300 calls have been purchased, versus fewer than 30 puts. The resultant call/put volume ratio of 153.79 is higher than all other comparable readings from the last 52 weeks.

This trend is holding up today, as WB follows its social media brethren into the black. The stock's calls are running at nearly five times the usual afternoon pace, with buy-to-open activity detected at the January 2016 15-strike call. By purchasing these in-the-money positions at a volume-weighted average price (VWAP) of $5, speculators are counting on WB toppling breakeven at $20 (strike plus VWAP) by January 2016 expiration.

Historically speaking, WB hasn't sniffed the north side of $20 since mid-November. However, as alluded to previously, the shares have spiked 7.8% to trade at $18.97. In other words, Weibo Corp (NASDAQ:WB) needs to rally just 5.5% over the next eight months in order to topple the strike.

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