Shares of Paypal Holdings Inc PYPL traded higher Monday after Reuters reported PayPal received the green light from China to buy a majority stake in a Chinese digital payments platform.
Despite increasing concerns over the ongoing trade war between the U.S. and China, some large option traders made bullish bets Monday morning on PayPal.
The Trades
On Monday, Benzinga Pro subscribers received five option alerts related to unusually large PayPal option trades.
- At 9:33 a.m., a trader sold 501 PayPal call options with a $103 strike price expiring Oct. 18 near the bid price at $2.661. The trade represented a $133,316 bearish bet.
- At 10:14 a.m., a trader bought 2,121 PayPal call options with a $130 strike price expiring Jan. 17, 2020. The series of three trades took place within a minute and were executed near ask prices ranging from 41.3 cents to 42.7 cents. The trades represented an $87,597 bullish bet.
- At 10:17 a.m., a trader bought 758 PayPal call options with a $103 strike price expiring Oct. 18 at the ask price of $2.82. The trade represented a $213,756 bullish bet.
Why It's Important
Even traders who stick exclusively to stocks often monitor option market activity closely for unusually large trades. Given the relative complexity of the options market, large options traders are typically considered to be more sophisticated than the average stock trader.
Many of these large options traders are wealthy individuals or institutions who may have unique information or theses related to the underlying stock.
Unfortunately, stock traders often use the options market to hedge against their larger stock positions, and there’s no surefire way to determine if an options trade is a standalone position or a hedge. In this case, given the relatively small sizes of the PayPal option trades by institutional standards, they are unlikely to be hedges.
Tapping The China Market?
PayPal shares traded higher Monday on news that the U.S. company would be the first international digital payments company allowed to operate in China. PayPal is taking a 70% investment stake in China’s Gopay Information Technology.
The financial terms of the deal were not released, but it is expected to close by the end of 2019. Digital payment transactions are expected to grow 23.2% in 2019 to $1.57 trillion in 2019, according to Statista.
Benzinga’s Take
Despite trade war concerns, China’s economy is still the largest emerging market economy, and its growth rate dwarfs the U.S. economic growth rate.
China also has more unbanked and underbanked citizens than any country in the world, and Monday’s call buyers may see China’s PayPal investment serving as a bullish catalyst for the stock heading into 2020.
The stock was up 1.36% at $103.59 at the time of publication.
Do you agree with this take? Email feedback@benzinga.com with your thoughts.
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