Alibaba Group Holding Ltd Option Bears Eye Yahoo-Inspired Bounce

Alibaba Group Holding Ltd (NYSE:BABA) is moving higher today thanks to Yahoo! Inc. (NASDAQ:YHOO), which could attract the attention of recent option traders

by Karee Venema

Published on Feb 19, 2016 at 11:39 AM
Updated on Jun 24, 2020 at 10:16 AM

Alibaba Group Holding Ltd (NYSE:BABA) is up 1.3% today at $67.34, once again moving in sync with Yahoo! Inc. (NASDAQ:YHOO) -- with YHOO jumping 2% on news it is exploring strategic options. However, BABA is running into trouble near its 30-day moving average -- which sits just below the equity's $68 IPO price -- highlighting the stock's recent technical troubles. In fact, amid pressure from this descending trendline, BABA has slumped 17% year-to-date, and option traders have been bracing for more downside.

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Specifically, at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), BABA's 10-day put/call volume ratio of 0.76 rests in the 81st annual percentile. In other words, puts have been bought to open at a faster-than-usual clip relative to calls.

Over this same time frame, the stock's March 85 put has seen the largest rise in open interest, with 14,534 contracts added. According to Trade-Alert, it appears the majority of the action here occurred last Wednesday when a speculative player upped the bearish ante by rolling her long February 90 puts down and out.

Outside of the option pits, sentiment among the brokerage bunch is rather upbeat. Among covering analysts, 16 out of 19 maintain a "buy" or "strong buy" recommendation toward the stock. Plus, the average 12-month price target of $93.77 sits in territory not charted since last May. Should Alibaba Group Holding Ltd (NYSE:BABA) resume its longer-term downtrend, a round of downgrades and/or price-target cuts could translate into a fresh wave of selling pressure.

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