Options Traders See Long Term Upside For Alibaba Stock

Alibaba Group Holding Ltd - ADR BABA reversed course Monday after creating a double bottom pattern near the $144 level on the daily chart. The beaten-down stock was seeing high interest within Reddit's WallStreetBets community on Sunday.

The stock has plummeted more than 54% since reaching an all-time high of $319.32 on Oct. 27, 2020, amid a Chinese government crackdown on its big tech companies and worsening U.S./China relations.

A number of institutions believe the bottom may be in for Alibaba and at 10:03 a.m. ET began hammering bullish Alibaba leaps (a call contract with a far-dated expiry). The traders chose monthly expiries of January and June 2023 and a strike price of either $100 or $170. Together the traders bet more than $24.7 million Alibaba will trade higher in the future.

See Also: How to Buy Alibaba Stock

Why It’s Important: When a sweep order occurs, it indicates the trader wanted to get into a position quickly and is anticipating an imminent large move in stock price. A sweeper pays the market price for the call or put option instead of placing a bid, which sweeps the order book of multiple exchanges to fill the order immediately.

These types of option orders are usually made by institutions, and retail investors can find watching for sweepers useful because it indicates “smart money” has entered into a position.

The BABA trades: Below is a look at the notable options alerts, courtesy of Benzinga Pro:

• At 10:03 a.m., a trader executed a call sweep near the ask of 234 Alibaba options with a strike price of $170 expiring on Jan. 20, 2023. The trade represented a $510,120 bullish bet for which the trader paid $21.80 per option contract.
• At 10:04 a.m., a trader executed a call sweep near the ask of 1,598 Alibaba options with a strike price of $100 expiring on Jan. 20, 2023. The trade represented a $9.14 million bullish bet for which the trader paid $57.20 per option contract.
• At 10:06 a.m., a trader executed a call sweep near the ask of 381 Alibaba options with a strike price of $100 expiring on Jan. 20, 2023. The trade represented a $2.17 million bullish bet for which the trader paid $57 per option contract.
• At 10:06 a.m., a trader executed a call sweep near the ask of 577 Alibaba options with a strike price of $100 expiring on Jan. 20, 2023. The trade represented a $3.28 million bullish bet for which the trader paid $56.95 per option contract.
• At 10:07 a.m., a trader executed a call sweep near the ask of 238 Alibaba options with a strike price of $170 expiring on Jan. 20, 2023. The trade represented a $499,800 bullish bet for which the trader paid $21 per option contract.
• At 10:07 a.m., a trader executed a call sweep near the ask of 262 Alibaba options with a strike price of $170 expiring on Jan. 20, 2023. The trade represented a $550,200 bullish bet for which the trader paid $21 per option contract.
• At 10:07 a.m., a trader executed a call sweep near the ask of 254 Alibaba options with a strike price of $100 expiring on Jan. 20, 2023. The trade represented a $1.44 million bullish bet for which the trader paid $57 per option contract.
• At 10:11 a.m., a trader executed a call sweep near the ask of 200 Alibaba options with a strike price of $100 expiring on Jan. 20, 2023. The trade represented a $1.14 million bullish bet for which the trader paid $57.23 per option contract.
• At 10:48 a.m., a trader executed a call sweep near the ask of 250 Alibaba options with a strike price of $100 expiring on June 16, 2023. The trade represented a $1.55 million bullish bet for which the trader paid $62 per option contract.
• At 10:48 a.m., a trader executed a call sweep near the ask of 250 Alibaba options with a strike price of $100 expiring on June 16, 2023. The trade represented a $1.55 million bullish bet for which the trader paid $62 per option contract.
• At 10:51 a.m., a trader executed a call sweep near the ask of 463 Alibaba options with a strike price of $100 expiring on June 16, 2023. The trade represented a $2.87 million bullish bet for which the trader paid $62 per option contract.

BABA Price Action: Shares of Alibaba were trading up 2.41% at $148.57 Monday at publication.