Options Trading News

September 22, 2016  Thu 10:24 AM CT


A large trade is looking for Alibaba to continue ripping higher.

optionMONSTER's market scanner shows that 10,000 October 112 calls were purchased for $1.79 to $1.87 while 10,000 October 117 calls were sold for $0.63 to $0.68 today. This is clearly new positioning, as volume dwarfed the open interest in both strikes.

This vertical spread is looking for  BABA to rally above $112 by expiration in mid-October. The sale of the higher-strike contracts reduces the cost of the long calls but limits potential gains, as the trader will be obligated to sell shares if they rise above $117. (See our Education section)

BABA is up 2.16 percent to $108.29 in morning trading and is up 35 percent in the last three months. The Chinese e-commerce giant announced bullish results on Aug. 11 and is expected to report its next earnings numbers in pre-market hours on Oct. 25, two session after today's call spread expires.

Overall option volume was about average in BABA so far today, but calls outnumber puts by a bullish 3-to-1 ratio.

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