Call Options Hot as Baidu Stock Swings Higher

The March 170 put is home to peak open interest on BIDU

Jan 2, 2019 at 2:39 PM
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The shares of Baidu Inc (NASDAQ:BIDU) were lower in early trading, pressured by weak Chinese economic data. However, BIDU stock was last seen up 3.2% at $163.67, after the Beijing-based e-commerce concern said 2018 revenue grew on a year-over-year basis. The bullish reversal has sparked heavier-than-usual call volume, with a number of traders eyeing even more short-term upside.

Nearly 13,000 calls have changed hands on BIDU so far today, about 1.4 times what's typically seen at this point. The weekly 1/11 172.50-strike call is most active, and it looks like new positions are being purchased here for a volume-weighted average price of $1.28. If this is the case, breakeven for the call buyers at the close next Friday, Jan. 11, is $173.78 (strike plus premium paid).

More broadly speaking, the March 170 put is home to peak open interest of 10,660 contracts. Data from Trade-Alert shows most of these positions were initiated on Dec. 21 and 24, but it's not clear whether they were bought or sold.

Looking at the charts, BIDU stock has struggled over the long term, shedding nearly 31% in the fourth quarter -- its worst quarter since 2015 -- and 32.3% in 2018. What's more, the shares hit a nearly two-year low of $154.61 on Dec. 26, under steady pressure from their 50-day moving average since late July.

bidu stock daily chart jan 2

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