One trader is betting that Youku Tudou will rebound from its steep selloff in recent days.
optionMONSTER's tracking systems detected the purchase of 3,450 May 29 calls for the ask price of $1.35 and the sale of 3,450 May 22 puts for the bid price of $0.70. The volume was far above the previous open interest in each strike, indicating that this is a new combination spread.
The position cost a net $0.65 and is highly bullish because a rally would increase the price of the long calls while reducing the value of the puts. But the opposite would occur if the stock falls, and those calls could expire worthless if the stock remains below $29 through expiration in mid-May. And because the trader sold puts , he or she faces the obligation to buy shares if they drop below $22. (See our Education section)
YOKU gained 5.04 percent to $26.26 yesterday. The Chinese video-streaming company hit a 52-week high of $37.74 in early March after reporting fourth-quarter earnings but then pulled back. Traders bet on a comeback by buying April 34 calls , but the stock kept falling and accelerated lower in recent days along with other momentum stocks.
Total option volume in Youku topped 11,200 contracts yesterday, more than 50 percent higher than its daily average for the last month.
Disclosure: I own YOKU shares.
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