Another China Stock Call Traders Are Targeting

Calls are outpacing puts at an astounding rate today

Deputy Editor
Jul 6, 2020 at 3:14 PM
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The shares of China-based streaming service Tencent Music Entertainment Group (NYSE:TME) are up 9.6% at $15.50 at last check, one of the bigger movers on the New York Stock Exchange (NYSE) today. TME, like it's list-peers, can attribute its rise to the recovery that investors hope to see in the world's second largest economy. As a result Tencent stock call options are a hot commodity at the moment. 

More specifically, TME calls are changing hands at seven times the intraday average, volume good for the 99th percentile of its annual range, and nearly 40 times the amount of puts that are trading. The most popular contract by far is the  July 14 call, followed by the 16 call from the same series, with new positions being opened at the latter.

This bullish behavior is nothing new, though. TME sports a 50-day call/put volume ratio of 27.18 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which sits higher than all but 1% of readings from the past 12 months. Echoing this, TME's Schaeffer's put/call open interest ratio (SOIR) of 0.36 sits in just the 14th percentile of its annual range, suggesting short-term option players have rarely been more call-heavy during the past 12 months.

The good news for options traders is that the security's Schaeffer's Volatility Index (SVI) of 39% stands higher than 10% of all other readings from the past year.This implies that near-term option traders are pricing in relatively low volatility expectations; a boon for premium buyers.

Today's breakout has TME toppling the $15.60 area and reclaiming their 12-month breakeven level. The shares have now almost doubled off their March 23 lows of $9.22, and have tacked on 33% in 2020.

TME Chart July 6


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