Unusual Options Activity: Alibaba Group Holding (BABA)

Chinese internet retailer Alibaba Group Holding (BABA) has been in an uptrend the past few months. One trader sees further upside in the weeks ahead.

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  • That’s based on the September 1 $115 calls. With 31 days until expiration, 13,146 contracts traded compared to a prior open interest of 106, for a massive 124-fold rise in volume on the trade. The buyer of the calls paid $1.82 to make the bullish bet.

    Shares recently traded for about $100, so they would need to see a 15 percent rally in the next month for the option to move in-the-money. That’s just barely within the stock’s 52-week range of $121 per share.

    The e-commerce giant is well over its 52-week low, as concerns about China cracking down on businesses, particularly Alibaba, have ended in the past few weeks. At current prices, Alibaba is priced at just 10 times forward earnings estimates, a massive discount to US-based peers.

    Action to take: Investors may like shares here, as the company’s footprint in China makes it a major play on the growing middle class there. At present, Alibaba does not pay a dividend.

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  • For traders, the September calls are aggressive, but inexpensive enough to see mid-double-digit gains or better if the current uptrend in shares continues. Plus, Alibaba is expected to next report earnings on August 10, so it may see a big move then.


    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.