Alibaba Call Buyers Target Familiar Level

A key trendline has been supporting Microsoft stock in 2018

Josh Selway
May 7, 2018 at 11:56 AM
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Microsoft Corporation (NASDAQ:MSFT) and Alibaba Group Holding Ltd (NYSE:BABA) both enjoyed upbeat earnings reactions in recent weeks, and options data suggests a number of traders have been betting on more upside in the near term. Schaeffer's Senior Quantitative Analyst Rocky White compiled a list of the 20 stocks that saw the heaviest options volume over the past 10 days, with names in yellow new to the list since the last time the study was run. As you can see, call volume on both MSFT and BABA has more than doubled put volume during this time.

most active options may 7

MSFT Options Traders Target June Series

Taking a closer look at Microsoft, the June 95 and 97.50 calls saw the largest increases in open interest during the past two weeks. Data from the major options exchanges shows heavy buy-to-open activity at both strikes, but especially the 95 call. These speculators are betting on more upside from MSFT shares over the next month or so. It should also be noted that peak open interest already resided at the June 100 call, where traders mostly bought to open positions.

In today's trading, the Dow component is trading up 1% at $96.11, sitting just below its post-earnings record high of $97.90 from April 27, as the company kicks off its Build conference today. MSFT has rallied 39.3% in the past year, and pullbacks so far in 2018 have been contained by the 100-day moving average.

BABA Call Buyers Bet On Another Move to $200

As for Alibaba, options traders in recent sessions have taken aim at a familiar level. Specifically, the June 200 call saw heavy trading in the past 10 days, and data shows a preponderance of buy-to-open activity here. These bulls expect BABA stock to top $200 before the contracts expire at the close on Friday, June 20.

The Chinese e-commerce stock hit an all-time high of $206.20 back on Jan. 31, and traded above $200 again as recently as March 16. At last check, the shares were up 3.6% today at $195.70, building off Friday's 3.5% post-earnings win thanks to several bull notes from analysts. At least seven brokerage firms have upped their price targets on the equity since Friday's close, the highest of which was $262 at Stifel. This is nothing new, though, with all 21 analysts in coverage already deeming Alibaba a "buy" or "strong buy." Elsewhere, BABA traders may also be keeping an eye on rival JD.com, as it prepares to report earnings tomorrow morning.


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