Call Traders Take on Surging Momo Stock

Few stocks have been hotter this year than China-based social media concern Momo Inc (ADR) (NASDAQ:MOMO). By the numbers, MOMO stock is up 5.9% today to trade at $37 -- fresh off a record high of $37.30 -- and has more than doubled in value on a year-to-date basis. Helping the shares along the way was an impressive earnings beat roughly one month ago. In the meantime, call traders have picked up the pace in MOMO's options pits. 

Looking at the data, MOMO call open interest is now in the 95th annual percentile, with more than 41,000 contracts outstanding. Narrowing it down to the past two weeks, the weekly 4/28 37.50-strike call saw the largest increase in open interest, with the May 40 call not far behind. Data from the major options exchanges confirms mainly buy-to-open activity at the former strike, while showing a majority of sell-to-open activity at the latter. So while some speculators are eyeing higher highs for the shares, others are betting on the round $40 level to act as near-term resistance. 

Today, MOMO call options are again active, trading at three times the expected intraday pace. This is due to heavy interest in the weekly 3/26 35-strike call, where more than 3,000 contracts have been exchanged. Data from the International Securities Exchange (ISE) confirms some new positions are being opened here, with those traders betting on extended upside for MOMO stock in the weeks ahead. 

It's certainly a good time to speculate on the equity with options. For instance, the shares have a Schaeffer's Volatility Index (SVI) of 53%, which ranks below 78% of all similar readings from the past year, pointing toward lower-than-usual volatility expectations for near-term options. Plus, Momo Inc has a Schaeffer's Volatility Scorecard (SVS) of 98, showing it has tended to make much bigger-than-expected moves on the charts over the past year, compared to what the options market has priced in.