EHang Options Traders See Further Upside

EHang Holdings Ltd - ADR EH announced on Monday it answered the Chinese government’s call for support in its fight to control COVID-19 resurgence in China’s Guangdong Province.

The Chinese autonomous developer and manufacturer reported it had spent 11 successful days deploying its EHang 216 and EHang 216L autonomous aerial vehicles (AAVs) to manage and control spread of the virus.

The AVVs are completing aerial logisitcs, emergency transportation, inspections and broadcasting, as well as delivering daily household supplies to the province’s residents who are quarantined.

Tuesday’s news provided more proof to investors that EHang’s AAVs have been developed with the necessary technology to complete the tasks they were built to do.

On June 4, EHang announced it had completed a successful test flight of its EHang 216 vehicle in Japan.

The news was welcomed by EHang bulls as the stock had spent months battling a drastic downtrend after plunging 63% when Wolfpack Research issued a Feb. 16 short report on the company and called it a sham.

The following day EHang shot back up almost 70% but that ended up being a “dead cat bounce” and the stock continued trading down until finding a bottom of $20 mid-May.

The downtrend looks to be over. On June 9, EHang’s stock made a higher high of $42.59.

On Tuesday, EHang gapped up almost 9% but immediately traded down to fill the gap.

Options traders believe there’s more upside for EHang’s stock and on Tuesday morning purchased call contracts totaling $127,317.

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 option instead of placing a bid, which sweeps the order book of multiple exchanges to fill the order immediately.

These types of call 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 EHang Option Trades: Below is a look at the most notable options alerts, courtesy of Benzinga Pro:

At 9:31 a.m., a trader executed a call sweep near the ask of 287 EHang options with a strike price of $55 expiring on June 18. The trade represented a $28,700 bullish bet for which the trader paid $1 per option contract.

At 9:32 a.m., a trader executed a call sweep near the ask of 288 EHang options with a strike price of $55 expiring on June 18. The trade represented a $34,560 bullish bet for which the trader paid $1.20 per option contract.

At 9:33 a.m., a trader executed a call sweep near the ask of 301 EHang options with a strike price of $55 expiring on June 18. The trade represented a $37,625 bullish bet for which the trader paid $1.25 per option contract.

At 9:42 a.m., a trader executed a call sweep near the ask of 224 EHang options with a strike price of $60 expiring on June 18. The trade represented a $26,432 bullish bet for which the trader paid $1.18 per option contract.

EH Price Action: EHang shares were trading down 2.90% at $39.21 on Tuesday at publication. 

(Photo: AAV VT-30 via EHang)