Most Active Options: Alibaba Group Holding Ltd and Twitter Inc

Weekly option traders have been circling Chinese e-tailer Alibaba Group Holding Ltd (NYSE:BABA) and social media firm Twitter Inc (NYSE:TWTR) ahead of earnings

Oct 26, 2015 at 3:11 PM
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The 20 stocks listed in the table below have attracted the highest total weekly options volume during the past 10 trading days. Names highlighted are new to the list since the last time the study was run, and data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White. Two notable names are Chinese e-tailer Alibaba Group Holding Ltd (NYSE:BABA) and social media firm Twitter Inc (NYSE:TWTR), both slated to report earnings tomorrow.


It's been a rough year for BABA, but the shares have been fighting back recently. Since hitting an all-time low of $57.20 in late September -- the day Yahoo! Inc. (NASDAQ:YHOO) said it would go ahead and spin off its stake -- the stock has added over 33.6% to trade at $76.43. What's more, on Friday the stock closed above its 20-week moving average for the first time since mid-June.

This recent strength has likely thrown off a few option bears. That is, BABA's 50-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 0.84 is higher than 92% of readings from the past year. In other words, put buying has recently picked up steam

However, the most popular weekly option over the past 10 days has actually been the 
weekly 10/30 80-strike call. Buyers are hoping for BABA to close the week above $80, a level last touched in early August. What's more, the stock's Schaeffer's Volatility Index (SVI) of 49% stands higher than 68% of all other readings from the past year, pointing to bigger-than-usual volatility expectations.

As for today's action, Alibaba Group Holding Ltd (NYSE:BABA) calls hold the advantage over puts, trading at four times normal volume, and at twice the rate of BABA puts. The stock's near-term at-the-money (ATM) straddle suggests traders are pricing in a move of 8.3% following tomorrow morning's earnings announcement -- heftier than the 6.4% swing BABA has averaged after its last four reports. 

Like BABA, TWTR has been unusually strong in the past month or so, picking up 14.5% to trade at $30.86, including a 1.9% jump today. The similarities continue when looking at the stock's 20-week moving average, which was just overcome for the first time since late April

It looks like TWTR's option traders were betting on this boost, too. At the ISE, CBOE, and PHLX, the stock boasts a 10-day call/put volume ratio of 3.77. Not only does this mean nearly four calls have been purchased for every put during the past two weeks, but the ratio also stands higher than 96% of all other readings from the past year. Plus, the equity's SVI of 68% stands in the 67th percentile of its annual range, suggesting near-term options are relatively price, historically speaking.

On a closer look, the weekly 10/30 35-strike call has has added nearly 18,000 positions over the past two weeks. Twitter Inc (NYSE:TWTR), which will report earnings after the close tomorrow, has not traded above $35 since late July -- before its last earnings release -- and would need to jump roughly 13% to topple $35. Strange enough, that's exactly the post-earnings swing the market is pricing in, according to the stock's near-term ATM straddle. 


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