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Weibo Corp (WB) Options Catch Fire as Stock Taps Record High

There is still plenty of bearish sentiment left to unwind on Weibo Corp (ADR) (WB)

Aug 29, 2016 at 3:01 PM
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It's been another good day for China-based social media interest Weibo Corp (ADR) (NASDAQ:WB), which snagged a fresh all-time high this morning at $52.29. The stock has been on a tear all year, adding 148% in 2016 alone. In fact, the shares have very nearly quadrupled in value over the last 12 months, last spotted essentially flat for the day at $48.40. And the action has been heating up in WB's options pits, where contracts are trading at three times their expected intraday pace.

WB's stock and options volumes are both on pace to finish today's session around annual highs. Open interest on the equity's options is already seated in the 99th percentile of its 12-month range, as well. Calls have a slight lead over puts today, and the September series has been popular, accounting for six of the 10 most active options.

The September 50 and 60 calls have taken the top spots so far, and it looks like a mix of fresh buying and selling action has happened at both strikes. Buyers of the calls are looking for WB to soar further into record-high territory, topping the strikes before the front-month series expires at the close on Friday, Sept. 16. Call sellers, meanwhile, are betting on the stock's gains being limited over the next few weeks.

It's an attractive time to pick up the equity's short-term options, too. WB currently has a Schaeffer's Volatility Index (SVI) of 46% -- in the low 9th percentile of its annual range. That means premium is pricing in muted volatility expectations at the moment. On a similar note, the stock's Schaeffer's Volatility Scorecard (SVS) sits at an annual peak, meaning the options market has tended to underprice WB's ability to make big moves over the past year.

Despite WB's incredible technical performance, the stock has seen considerable bearish attention both in and out of the options pits lately. In fact, short-term options traders are near a put-skewed extreme, per the stock's Schaeffer's put/call open interest ratio (SOIR) of 1.28 -- higher than 97% of all readings in the past year.

Elsewhere, short interest on the stock continues to climb -- up nearly 5% during the two most recent reporting periods, specifically. These bearish bets now represent 19.5% of WB's available float. That's plenty of buying power to send the shares to new heights, should these pessimists finally surrender their losing positions.

Analysts have taken a more upbeat view of WB, with all three brokerages tracking the stock rating it a "buy" or better. Still, there could be price-target hikes ahead for Weibo Corp (ADR) (NASDAQ:WB), as the consensus 12-month price target of $40.27 sits at a substantial discount to current trading levels.

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