Bulls return to China shop with Sina

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The bulls are coming back to the China shop, looking for a rally in e-commerce stock Sina.

Our tracking programs detected the purchase of 10,000 December 80 calls for $1.88 and the sale of 10,000 December 90 calls for $0.78. There was virtually no open interest in either contract before the trade appeared, so this is a new position.

Buying calls locks in the entry price for a stock, while selling them obligates a trader to unload shares at a certain level if they are above it. (See our Education section)

In the case of yesterday's transaction, they have the right to buy SINA for $80 and then must sell it for $90 if it's over that higher price. They paid $1.10 for that $10 spread.

SINA closed yesterday at $64.38, up 1.23 percent. Although it would have to rally about 40 percent to reach $90, the option strategy would leverage that move into a profit of more than 809 percen t.

The stock is trying to rebound from a major pullback that erased more than two-thirds of its value between April 2011 and July 2012. The last earnings report on Aug. 15 beat expectations, and management remained positive on monetizing its Weibo microblogging service.

Overall option volume was more than triple the daily average in SINA yesterday, with calls outnumbering puts by 5 to 1.

(A version of this post appeared on InsideOptions Pro yesterday.)



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.


This article appears in: Investing , Options

Referenced Stocks: SINA

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