Calls bet on rebound in 21Vianet

Mike Yamamoto (mike.yamamoto@optionmonster.com)
November 27, 2013

21Vianet dropped sharply yesterday after disappointing quarterly results, but traders are betting on a rebound by next spring.

More than 3,200 March 20 calls traded in a strongly bullish pattern yesterday for $0.85 to $1.04, according to optionMONSTER's Heat Seeker tracking system. Open interest in the name was just 101 contracts before the trading appeared, indicating that it represents fresh buying.

These long calls lock in the price where traders can buy the stock through mid-March no matter how far it might climb. They could be sold earlier at a profit if premiums rise with a rally before then, but the contracts will expire worthless if shares remain below $20. (See our Education section)

VNET fell 8.8 percent yesterday to close at $16.78. The Chinese data-center company had been pulling back since hitting a 52-week high of $21.09 on Nov. 15 and fell further after reporting weak revenues and issuing poor guidance Monday evening.

Total option volume in VNET topped 5,200 contracts yesterday, more than 18 times its daily average for the last month. Overall calls outpaced puts by about 3.5 to 1.


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