Options traders are wasting no time capitalizing on Baidu’s major earnings beat, making a blizzard of bullish bets that the Chinese tech giant could be primed for a comeback.
Like many of its peers, Baidu has been in a long and precipitous decline, dropping more than 48% in the past 12 months. However, the stock has fared slightly better than the KWEB ETF that tracks the broader Chinese technology stock space, which is down nearly 65% in that same time period.
Now, traders see that relative outperformance turning into meaningful upside.
“[Baidu] traded four times its average daily call volume, over 50,000 contracts in total. A lot of that was short-dated upside call buying, but one of the more active contracts seeing opening activity was the April 170-calls,” Michael Khouw, chief investment officer at Optimize Advisors, said Tuesday on CNBC’s “Fast Money.”
“We saw over 3,200 of those trading for just over $9.50. Buyers of those calls are obviously betting the stock will exceed that strike price by at least the premium they spent,” said Khouw, “and that would be an increase of over 10% over the course of the next six weeks.”
Baidu has since given up some of those post-earnings gains after reporting before the bell on Tuesday, trading down nearly 5% in Wednesday’s session.
