Bulls Come Back to Youku Tudou


 By Mike Yamamoto of OptionMonster

NEW YORK -- Youku Tudou ( YOKU) has been beaten down for months but option traders are looking for a rebound.

OptionMonster's tracking systems detected heavy call buying in several strikes Wednesday. 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.

Youku's stock ended the session up 8.05% 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 Wednesday was quadruple its daily average for the last month, with overall calls outnumbering puts by more than 10 to 1.

Yamamoto owns YOKU shares.

 

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

If you liked this article you might like

Think Unicorns Are Dead? These 3 Big Venture Capital Exits Say Otherwise

Think Unicorns Are Dead? These 3 Big Venture Capital Exits Say Otherwise

Youku Tudou (YOKU) Stock Declines, Trading in China Halted

Youku Tudou (YOKU) Stock Declines, Trading in China Halted

Youku Tudou (YOKU) Marked As A Barbarian At The Gate

Youku Tudou (YOKU) Marked As A Barbarian At The Gate

Chinese Firms Bail on U.S. Stock Listings as Market Rules Slow Business

Chinese Firms Bail on U.S. Stock Listings as Market Rules Slow Business

Youku Tudou (YOKU) Stock Closed Up as China's Stocks Climbed

Youku Tudou (YOKU) Stock Closed Up as China's Stocks Climbed