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

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.


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.

Sign up now for Schaeffer's Market Recap to get all the day's big stock movers, must-know technical  levels, and top economic stories straight to your inbox.

A Schaeffer's exclusive!

The Expert's Guide

Access your FREE trading earning announcements before it's too late!



NEW! Explore Schaeffer’s Partners' deals and get connected to top online brokerages with deals tailored exclusively for our readers.  Get answers to your questions regarding transfer fees, commission rates, programs and available discounts related to online trading services.

MORE | MARKETstories

The Nevada Discovery That Could Jeopardize Chinese Dominance
Click to continue to advertiser's site.
Puts Popular as GM Stock Rallies
GM puts are all the rage lately
JetBlue Stock Surging Despite Sector Skepticism
J.P. Morgan Securities downgraded JBLU to "neutral" from "overweight"
The Nevada Discovery That Could Jeopardize Chinese Dominance
Click to continue to advertiser's site.