Option Bulls Blast BABA During Volatile Earnings Season

Analysts are still holding out hope for BABA, despite the recent tumult

Deputy Editor
May 17, 2021 at 2:56 PM
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The oft buzzed-about Alibaba Group Holding Ltd (NYSE:BABA) graced headlines yet again last week, limping out of the earnings confessional with a sizable net loss -- its first since 2012 -- thanks in part to a massive fine the China-based tech company incurred during the quarter, imposed by Beijing on accusations of monopolizing the market. The news had U.S.-listed shares reeling on Thursday, hitting their lowest level in almost a year. Since the rout, however, the stock looks to be on the rise, and was last seen up 0.3% at $210.08. 

BABA May 17

Option traders ears perked up ahead of BABA's earnings event, putting the equity back on Schaeffer's Senior Quantitative Analyst Rocky White's list of stocks that attracted the most  option volume during the past 10 days, with names highlighted in yellow new to the list. According to White, 377,054 calls and 181,289 puts were exchanged. The most popular contract during this period was the May 230 call, followed by the weekly 5/14 245-strike call, which expired last Friday. 

mao chart may 17

Calls continue to be picked up at a much quicker clip than puts today. In fact, the 122,000 calls exchanged so far are running at almost three times the number of puts exchanged, which currently amounts to 46,000. Today's most popular contract is the May 215 call, while the 220 call in the same series is also popular with positions being opened at the former. 

Despite Alibaba stock's tumultuous year on the charts, analysts remain hopeful. Of the 18 in coverage, 17 call it a "buy" or better, compared to one "hold" rating. Meanwhile, the 12-month consensus price target of $299.44 is a 42.6% premium to current levels.  

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