Many Reasons to Target Chinese Video Stock

BILI is also ripe for a short squeeze

Oct 21, 2020 at 3:42 PM
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Chinese video game concern Bilibili Inc (NASDAQ:BILI) just recently pulled back to its 100-day moving average, an area that has acted as consistent support since late 2019. Longer term, the stock sports an impressive 135% year-to-date lead, but could add to that tally as 2020 mercifully winds down.

BILI 100

 

A short squeeze could create additional tailwinds for the security. Short interest is up 35% in the past five months, making up 8.6% of the stock's available float. That bearish sentiment is reiterated in the options pits, where puts are popular. This is per the BILI’s Schaeffer's put/call open interest ratio (SOIR) of 1.04, which stands higher 73% of readings from the past year. In other words, short-term option traders have rarely been more put-biased. Digging deeper, data shows that a large cluster of 45-strike calls expired this week too, removing a potential options-related resistance.

The good news for options traders is that BILI is pricing in relatively low volatility expectations at the moment. This is per the stock's Schaeffer's Volatility Index (SVI) of 61%, which sits higher than just 26% of all other annual readings.

Plus, BILI’s Schaeffer's Volatility Scorecard (SVS) ranks at a high 83 out of 100, meaning the security has tended to exceed these expectations during the past year, a boon for premium buyers.  

Subscribers to Schaeffer's Weekend Trader options recommendation service received this BILI commentary on Sunday night, along with a detailed options trade recommendation -- including complete entry and exit parameters. Learn more about why Weekend Trader is one of our most popular options trading services.

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