Option traders are confident that neither the SEC Probe nor the Softbank sale will have any impact on Alibaba stock
Alibaba Group Holdings (NYSE:BABA) stock has recently been bearish amid investor concerns on the recent SEC probe into its accounting practices. While this has created some negative sentiments in the investors, option traders feel that there is nothing to worry as they have strategies to defend their positions. Option traders feel that Alibaba would remain a strong scrip despite the SEC investigations or the recent Softbank sale of its stock.
One of the confident investors of the Chinese e-commerce giant has sold some 21,000 put options that expire in August. The strike price of these options is $60. The transaction implies that if the stock price goes below $60, the investor will have to buy 2.1 million shares of the company. Meanwhile, another bullish investor has taken a different approach; this investor has brought 7,500 call options for July with a strike price of $82.50. This bet would only pay off the investor if the stock price is above the strike price.
In the past one year, Alibaba stock has traded between $57.2-91.6. The company is expected to report quarterly results in August and is expected to report a quarterly revenue of $29 billion with an EPS of $4.16. However, a few analysts feel that Alibaba Group has immense pressure from competitors within the US. Alibaba rival, Amazon.com Inc. (NASDAQ:AMZN) touched its all time high this Monday and is expected to touch a $1000 soon, according to analysts. That, accompanied with a slow chine economy poses some serious challenges.
However, it is worth noticing that despite major challenges, these investors have betted on the company. Street Houses such as Deutsche Bank and Robert W. Baird are also bullish on the stock and expect it to set a new 52-week high. The indicative TP is $99.17, which offers almost 27% upside from the current levels. Let’s see if Alibaba stock can perform up to the expectations of Street Analysts.