Markets

Bulls are betting big on Youku.com

Youku.com has lost about two-thirds of its value since April, but now the bulls are coming back.

optionMONSTER's Heat Seeker tracking system detected a surge of activity in the Chinese media company yesterday and today, with the same trade apparently happening twice.

While the activity is not entirely clear, the strategy seems highly leveraged to the upside, with the potential to earn more than 1,000 percent from a modest rebound in the share price. It consists of owning the December 25 calls and being short the December 15 puts and the December 35 calls.

The trader paid $4.50 for the 25s and sold the 15s and 35s for $1.80 each, resulting in a net cost of just $0.90. If YOKU finishes the year at $35 or higher, the spread will widen to $10. It will also have downside risk if the shares fall toward $15.

YOKU, which provides television service over the Internet in China, went public for $12.80 a share last December. It immediately gapped higher and surged over $68 by the spring before rolling over and falling back toward $21. The shares are up 5.23 percent to $22.44 in midday trading.

The company reported earnings on Monday that appear to have been strong, with revenue at $30.6 million compared with the $26.46 million estimate. The loss was also a penny narrower than feared.

Overall option volume in YOKU is more than 5 times greater than average so far today.

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

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


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

Other Topics

Options

Latest Markets Videos