Call options have been flying on Alibaba Group Holding Ltd (BABA) and Netflix, Inc. (NFLX) lately
The 20 stocks listed in the table below have attracted the highest options volume during the past 10 trading days. Stocks highlighted are new to the list since the last time the study was run, and data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White. Among the stocks attracting notable attention are e-tail stock
Alibaba Group Holding Ltd (NYSE:BABA) and internet TV network
Netflix, Inc. (NASDAQ:NFLX). Here's a quick look at how options traders are lining up on BABA and NFLX.
BABA is bucking the broad-market trend higher today, down 2.1% at $89.23. In fact, the stock has been sitting out the post-election "Trump rally" in general, down 10.6% since Election Day. And while the shares recently touched their 160-day moving average, data shows such signals haven't been bullish -- with an average post-signal, 21-day return of negative 1.4%.
Per the chart above, Alibaba options have been flying off the shelves of late. On an absolute basis, calls have dominated, per the stock's 20-day call/put volume ratio of 2.35 across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). With one-tenth of BABA's float sold short, it's possible these long calls came at the hands of short sellers hedging -- but a capitulation among "vanilla" option bulls could intensify headwinds.
In today's action, put traders have a rare advantage, accounting for the three most popular strikes. Of these, it appears the at-the-money January 2017 90-strike put is seeing buy-to-open activity. Speaking more broadly, nearly 68,000 Alibaba Group Holding Ltd puts have been exchanged -- double the normal intraday rate, and edging out the 62,000 call options on the tape.
Turning to NFLX, the shares are 1.8% higher at $125.65. However, the company could be feeling pricing pressure following Amazon.com, Inc.'s (NASDAQ:AMZN) recent Prime Video deal. Weighing in was Cantor Fitzgerald, which said Netflix may be forced to offer "tiered pricing in select markets sooner rather than later" in order to compete.
If these fundamental considerations hit the stock, don't expect the 40-day moving average to stop the bleeding. NFLX has touched this trendline nine times in the past three years, and gone on to give up more ground half the time -- with an average 21-day loss of 1.7%. The $114-$115 area might be a more realistic area of support, considering it contained a pullback in mid-November, and corresponds with the shares' year-to-date breakeven mark.
On the options front, call buyers have been busy at the ISE, CBOE, and PHLX, emboldened by ongoing M&A buzz. During the last two weeks, Netflix, Inc. has amassed a call/put volume ratio of 1.59 -- just 9 percentage points from an annual high. It's more of the same today, with calls running at 1.9 times the average intraday rate -- including potential buy-to-open activity at the December 125, 126, and 127 strikes.
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