Unusual Options Activity: JD.com (JD)

Chinese internet retailer JD.com (JD) has seen its shares get cut nearly in half over the past year. One trader is betting on a further decline in the coming weeks.

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  • That’s based on the August $50 puts. With 45 days until expiration, 27,488 contracts traded compared to a prior open interest of 137, for a whopping 201-fold jump in volume on the trade. The buyer of the puts paid $15.90.

    Shares recently traded for about $34, making the option about $16 in-the-money.

    At current prices, the option price has no time premium attached to it, which may have attracted investors to the trade. JD.com shares have a 52-week low of about $31.50, which occurred at the end of May.

    The retailer saw revenues rise just 1.4 percent last year, and fears of a slowing economy in China may continue to weigh on the stock.

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  • Action to take: Investors have better places in the retail space to invest in right now, given the slowdown in growth in JD.com and the headwinds impacting China’s economy.

    For traders, the puts are an interesting trade as they could see mid-double-digit gains on a further decline in shares. Plus, the option pricing favors buyers heavily here, given the lack of time premium on the options.

     

    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.

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