Disney Deal Sends Alibaba Stock Higher – Schaeffers Research (press release)

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The 20 stocks listed in the table below have attracted the highest total options volume during the past 10 days. Stocks highlighted in yellow are new entries to the list, and data is courtesy of Schaeffer’s Senior Quantitative Analyst Rocky White. Two names standing out in today’s trading are e-commerce concern Alibaba Group Holding Ltd (NYSE:BABA) and chip stock NVIDIA Corporation (NASDAQ:NVDA). Below, we’ll break down some of the recent options activity on BABA and NVDA, and see how the two are faring on the charts.

BABA Glides Higher on DIS Deal

Alibaba stock is making headlines after landing a video licensing deal with Walt Disney (DIS), and in response the shares were trading up 0.4% at $177.41, at last check. BABA touched a record high of $206.20 on Jan. 31, before pulling back with the broader equities market, but found support atop its 160-day moving average.

Unsurprisingly, analyst sentiment is optimistic. All of the 22 analysts following the Chinese-based stock sport “buy” or “strong buy” recommendations. Further, BABA’s average 12-month price target of $221.84 represents a 25% premium from the stock’s current perch, and sits in uncharted territory.

Digging deeper, the March 185 and 210 calls have seen the largest increases in open interest during the past two weeks, with about 27,000 and 19,000 contracts added, respectively. According to data from the major options exchanges, a healthy portion of the calls were of the buy-to-open variety.

Lastly, Alibaba premium buyers have been rewarded over the past 12 months, with the security’s Schaeffer’s Volatility Scorecard (SVS) reading at a lofty 91.

NVDA Dips Despite Analyst Price-Target Hike

Nvidia last week reported better-than-expected earnings and issued a well-received forecast. However, the stock’s upward momentum was stifled by its now bearishly crossed 10-day and 20-day moving averages, which haven’t been toppled on a daily closing basis since just after the shares’ record high of $249.27 on Jan. 31.

NVDA stock this morning received a price-target raise from Citigroup, to $270 from $240. Nevertheless, the semiconductor stock was last seen trading slightly lower, down 1.4% at $229.19.

NVDA’s call options volume has been surging of late, as options traders bet bullishly ahead of earnings. The influx of calls is most evident in the stock’s 10-day call/put volume ratio of 1.71 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), ranking in the 80th annual percentile. This indicates calls have been purchased over puts at a faster-than-usual clip over this time period.

Looking further, the March 240 put and call have seen the largest increase in open interest during this time frame, with more than 26,000 contracts combined added. Options traders may have been looking at NVDA shares as part of a pre-earnings spread strategy. NVIDIA stock sports an SVS reading of 92, meaning the shares have consistently exceeded options traders’ volatility expectations over the past year.

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