Weibo Corp (WB) Options Volume Booms

Weibo Corp (ADR) (NASDAQ:WB) is one of several China-based stocks moving higher today

Jul 7, 2016 at 2:01 PM
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Social media stock Weibo Corp (ADR) (NASDAQ:WB) is one of several China-based stocks making a large move to the upside today, with the shares last seen 9.6% higher at $31.23. Moreover, WB earlier hit an all-time high of $31.41, and is now 60% higher year-to-date. Elsewhere, options traders are taking action amid today's outsized price action. 

WB options volume is currently on pace to hit a 12-month high, with put and call volume running at three and six times their intraday averages, respectively. Action on the call side has been driven by two nearly identical spread trades involving the October 26 and 32 calls -- possibly the result of one options trader rolling her now in-the-money 26 calls up to the 32 strike.

For put traders, the August 30 strike is most popular, and buy-to-open action seems likely. If this is the case, these bears are betting that WB stock will surrender the round-number level before the options expire on Friday, August 19. However, this could also be indicative of shareholders protecting paper profits against an unexpected decline.

WB is not an actively traded ticker on the major options exchanges -- just over 1,500 contracts total were bought to open during the past two weeks across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Nevertheless, now may be an opportune time for short-term options buyers to climb on board.

For starters, the stock's Schaeffer's Volatility Index (SVI) of 46% ranks in the 8th annual percentile. Moreover, WB's Schaeffer's Volatility Scorecard (SVS) stands at 97. So, not only does this SVI reading suggest premium on the stock's near-term options is pricing in relatively low volatility expectations at the moment, but its SVS indicates WB has shown a tendency to make bigger-than-expected moves during the past year, compared to what the options market has priced in. 

WB has caught the attention of another group of traders, though. That is, short interest exploded by 53% in the last reporting period alone. However, the security's bearish bandwagon is far from crowded, as it would only take under two days for these shorts to cover their positions. 

In the meantime, Weibo Corp (ADR) (NASDAQ:WB) may be due for some bullish analyst attention, especially if the shares keep moving higher. At $25.01, WB's average 12-month price target comes in well below current trading levels, indicating future price-target hikes from the brokerage bunch are a possibility. 

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