Alibaba Options Active in U.S. Trading Debut

Features Reuters

Chinese e-commerce heavyweight Alibaba Group Holding Ltd's options contracts were active in their first day of trading on U.S. exchanges on Monday, with bullish and bearish bets about even in the early going.

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Options volume for Alibaba was 45,000 contracts, with 24,000 calls and 21,000 puts traded so far, according to data from options analytics firm Trade Alert.

A relatively equal number of calls and puts implies equal numbers of bets on the Alibaba stock climbing or falling from current levels.

At a size of more than $25 billion, Alibaba's IPO is ranked as the world's biggest and saw some 368 million shares sold.

The trading in Alibaba's options was orderly with almost 70 percent of calls and 75 percent of puts trading between the bid and ask prices, said J.J. Kinahan, chief market strategist at retail brokerage TD Ameritrade Holding Corp.

"It is a credit to the market makers that the market looks at Alibaba as being at the proper volatility right now," said Kinahan.

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The 30-day implied volatility for the options was at 41.54 percent according to Livevol data. Implied volatility of Chinese Internet stocks Weibo Corp and Baidu Inc were at 60.82 percent and 36.43 percent, respectively.

Implied volatility, a measure of the risk that big moves in the stock pose and a key factor in setting options prices, is typically high for stocks that have recently had their initial public offering.

Alibaba shares, which rose about 38 percent in their trading debut on the New York Stock Exchange on Sept. 19, were trading down about 2 percent at $88.96 in early trade on Monday.