Options Traders Cheer Red-Hot Netflix, Alibaba Stocks

Options traders have been buying to open calls on Netflix and Alibaba stocks

Karee Venema
Apr 17, 2017 at 11:55 AM
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The 20 stocks listed in the table below have attracted the highest total options volume during the past 10 trading days. Stocks highlighted are new to the list since the last time the study was run, and data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White. Two names of notable interest are streaming giant Netflix, Inc. (NASDAQ:NFLX) and China-based e-commerce issue Alibaba. Here's a quick look at how options traders have been placing their bets on shares of NFLX and BABA stock.   

most active stock options april 17

Netflix Options Traders Busy Ahead of Earnings

NFLX is in the limelight today, ahead of the company's first-quarter earnings report -- due after the closing bell. At last check, NFLX stock was trading up 2.5% at $146.43, widening its year-to-date advance to 19%. Plus, the shares continue to trade north of their 40-day moving average, a trendline that has served as support in recent weeks, including during Netflix stock's most recent pullback from its March 30 record high at $148.29.

There's a surge in pre-earnings options volume, too, with roughly 85,000 contracts traded so far today -- almost triple what's typically seen at this point in the session. Nine of NFLX's 10 most active options reside in the front-month April series, with the April 150 and 160 strikes standing as the most popular calls. While it's not clear whether positions are being opened or closed here, the April 145 call is home to peak front-month open interest of 12,935 contracts. Data from the major exchanges points to mostly buy-to-open activity in recent months, meaning options traders expect NFLX stock to settle north of $145 at this Friday's close.

Looking back over the past eight quarters, NFLX has tended to make big post-earnings moves -- averaging an 11.7% swing in the session subsequent to reporting. It's been a coin toss as to whether these earnings reactions have been positive or negative, though the two most recent quarters have seen the action resolve to the upside. This time around, the options market is pricing in a slightly bigger move of 12.6% for Netflix stock in tomorrow's trading.

BABA Options Traders Bet On Bigger Gains

BABA call buyers have been active in recent weeks, per data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Over the last 10 trading sessions, options traders have bought to open 93,297 calls on BABA, compared to 31,080 puts. The resultant call/put volume ratio of 3.00 ranks in the 88th annual percentile, pointing to elevated demand for long calls relative to puts.

Drilling down, BABA's May 110 call has seen the biggest rise in open interest over this time frame, with 16,541 contracts added. Data from the ISE, CBOE, and PHLX confirms that the bulk of this activity was of the buy-to-open kind, meaning speculative players believe BABA stock will close north of $110 when the back-month options expire at the close on Friday, May 19. 

At last check, BABA stock was trading up 0.5% at $110.81, after Alibaba's financial arm, Ant Financial, upped the ante in its pursuit of Moneygram International Inc (NASDAQ:MGI). This positive price action is just more of the same for Alibaba stock, though. Year-to-date, the shares have surged a brow-raising 26.2%, and are within a chip-shot of taking out their April 10 two-year high of $111.88.

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