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Is Youku becoming the next Netflix?

David Russell (david.russell@optionmonster.com)

Netflix isn't the only on-demand video stock that's been running to the upside.

optionMONSTER's Heat Seeker monitoring system detected unusual call buying in Youku Tudou, which lets customers in China search, view, and share content across multiple devices. Activity focused on the October 29 calls, with large blocks crossing for $1.47 to $1.58. More than 2,700 contracts traded against previous open interest of just 953 contracts.

These long calls lock in the price where YOKU shares can be purchased, letting investors benefit from upside in the stock while limiting risk. About 2,100 October 26s were sold around the same time the October 29s were bought, so the trader may have rolled a winning position up to the higher strike. (See our Education section for more on how to manage trades more effectively with options.)

YOKU rose 1.32 percent to $29.94 yesterday. The Beijing-based name traded sideways for about two years but has been catching fire recently as money flows into Chinese Internet companies. The stock is up 12 percent in the last month, about double NFLX's move over the same period. But its 64 percent gain since Jan. 1 pales in comparison with the American company's 250 percent rally.

Total option volume in YOKU was below average in the session, but calls outnumbered puts by a bullish 15 to 1.

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