Alibaba Group Holding Ltd (BABA) Put Options Pop as SEC Probe Takes a Twist

Alibaba Group Holding Ltd (BABA) is preparing to enter the earnings confessional tomorrow morning

Nov 1, 2016 at 2:05 PM
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Alibaba Group Holding Ltd (NYSE:BABA) is down 1.6% at $100.07, after the New York Post reported a "high-up" at the e-tailer is helping the Securities and Exchange Commission (SEC) with its accounting probe. One inside source added the SEC "may be using other whistleblowers," too. Amid this drama, and ahead of tomorrow morning's earnings report, BABA options are trading at a brisk pace.

Jumping right in, Alibaba put options are changing hands at triple the typical intraday rate, and put volume registers in the 98th percentile of its annual range. The strike seeing the clearest buy-to-open activity is the deep out-of-the-money December 80 put. By purchasing these options, traders may be banking on a selloff through back-month expiration, at the close on Friday, Dec. 16. Alternatively, the buyers may be BABA shareholders hedging against a post-earnings plunge.

Longer term, calls have been the options of choice among BABA traders. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), speculators have bought to open 2.71 calls for every put during the last 50 sessions -- a ratio that ranks in the high 91st annual percentile.

It's hard to blame options players for being upbeat. The stock has fared well in the aftermath of earnings, historically speaking, finishing the ensuing session higher five times over the past eight quarters. Last time around, in fact, BABA surged 5.1% in the session after earnings.

What's more, Alibaba Group Holding Ltd (NYSE:BABA) has come a long way in 2016. Year-to-date, the shares have trekked 23% higher, and late last month touched an annual peak of $109.87.

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