Youku Tudou has been beaten down for months, but traders are looking for a rebound.
optionMONSTER's Heat Seeker tracking system detected heavy call buying in several strikes yesterday. The July 20s led the action, with 5,800 trading for $1.20 to $2.45 in volume well above previous open interest of 1,537 contracts. More than 5,700 July 19 calls also changed hands for $1.75 to $3.30, also well above previous positioning.
These long calls lock in the price where the stock can be purchased through mid-July no matter how far it might climb. They could be sold earlier at a profit if premiums rise with a rally before then, providing potentially significant leverage, but the contracts will quickly lose value if shares stall or pull back. (See our Education section)
YOKU ended the session up 8.05 percent to $21.62. The Chinese media-streaming company had lost about a third of its valuation since trading near $30 in early April, but the heavily shorted stock appears to have found support around the $19 level this month.
Overall option volume in the name yesterday was quadruple its daily average for the last month, with overall calls outnumbering puts by more than 10 to 1.
Disclosure: I own YOKU shares.
(A version of this post appeared on InsideOptions Pro yesterday.)
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