Alibaba options debut

September 30, 2014 04:41 AM

Options on recent IPO Alibaba (BABA) were actively traded as derivatives dealing began Monday. The stock attracted overall option volume of 122,000 contracts in its first day, which was impressive at least in contrast to GoPro’s  option debut where volume was notably absent at the start (Ticker: GPRO).  

Despite a closing 1.95% loss for its share price to $88.70, activity in Alibaba’s options was relatively balanced. While it was protective puts at the 85.0 strike and bullish calls at the 95.0 strike in the November expiration that attracted most volume, we picked up on combination activity elsewhere.

Among the most actively traded contracts to start the week, both puts and calls at the December expiration with a strike price of 90.0 were also well-traded. Put activity reached 5,071 lots while 6,990 calls changed hands at that strike. Our market scanner detected that around 3,500 straddles were traded using the combination of both option types. The combined premiums at one point reached as high as $14.50 for the straddle before closing at around $13.30. Implied volatility in the December contract closed at around 40%. The chart below shows the slow drift lower for call and put premiums during the day as volatility settled even as the broader market gave option traders a wild ride. 



Chart: December 90 strike calls and puts were actively traded on day one.

About the Author

Andrew is a seasoned trader and commentator of global financial markets. He worked for several London-based banks trading cash and derivatives before moving to the U.S. to attend graduate school. Andrew re-joins Interactive Brokers following a two-year stretch at a major Wall Street broker-dealer as their Chief Economic Strategist. His coverage of stocks, options, futures, forex and bonds regularly surfaces in global media, and over the last several years Andrew has made many TV appearances on Bloomberg, BBC, CNBC and BNN and Yahoo Finance.