Unusual Options Activity: iQIYI (IQ)

iQIYI (IQ)

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  • Bet on rally through December.

    Call options expiring on December 20th with a $21 strike price on iQIYI (IQ) saw a 73-fold rise in volume, going from 115 open contracts to nearly 8,500 contracts trading hands.

    With the trade expiring in 21 days, and as shares of IQ trader just under $20, it’s a bet that shares will rally about 6 percent in the next few weeks.

    Given that shares have traded as high as $29 in the last year, a move higher is likely.

    Shares of the Chinese online entertainment company have slid 3 percent in the past year, but shares are off their 52-week lows and are starting to head higher.

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  • Action to take: Given the decline in shares and the move higher in recent weeks, there’s a good technical rally in place. While the company’s fundamentals are still showing a loss, it’s got some long-term potential as well as a number of other Chinese companies. Investors may want to look at buying shares under $20, with the expectation of taking some profits if shares get back to their old 52-week high near $30, almost 50 percent higher.

    Speculators can join in on the December call trade. But for a trade more likely to grab a longer rally in shares, the June 2020 $22.50 calls, trading for around $1.85, look like a bet that could deliver some great high-double-digit returns as well.