Options traders are losing no time capitalizing on Baidu’s main earnings beat, making a blizzard of bullish bets that the Chinese tech big might be primed for a comeback.
Like lots of its friends, Baidu has been in an extended and precipitous decline, dropping greater than 48% up to now 12 months. However, the inventory has fared barely higher than the KWEB ETF that tracks the broader Chinese expertise inventory house, which is down almost 65% in that very same time interval.
Now, traders see that relative outperformance turning into significant upside.
“[Baidu] traded 4 instances its common every day call quantity, over 50,000 contracts in whole. Quite a lot of that was short-dated upside name shopping for, however one of many extra energetic contracts seeing opening exercise was the April 170-calls,” Michael Khouw, chief funding officer at Optimize Advisors, mentioned Tuesday on CNBC’s “Fast Money.”
“We noticed over 3,200 of these buying and selling for simply over $9.50. Buyers of these calls are clearly betting the inventory will exceed that strike value by not less than the premium they spent,” mentioned Khouw, “and that will be a rise of over 10% over the course of the following six weeks.”
Baidu has since given up a few of these post-earnings features after reporting earlier than the bell on Tuesday, buying and selling down almost 5% in Wednesday’s session.