BIDU – Baidu, Inc. – The Chinese-language internet search provider’s shares jumped 3.6% to an intraday high of $80.87 today after the firm received an upgrade to ‘buy’ from ‘neutral’ with an increased target share price estimate of $92.00 from $69.00 at UBS. Shares were also lifted higher on news Baidu is in talks with mobile phone makers to discuss use of the firm’s search box on devices sold in China. The price of the underlying stock is currently up 2.05% on the day to arrive at $79.67 as of 3:00 pm (ET). Options players itching for continued appreciation in the price of the underlying shares through the end of this month purchased weekly call options on the stock that are set to expire on July 30. Investors picked up 1,000 calls at the July $80 strike for an average premium of $1.48 each. Call buyers at this strike make money if Baidu’s shares rally another 2.3% to trade above the average breakeven price of $81.48 by expiration day. Optimistic individuals looking for BIDU’s shares to hit a new 52-week high before the week is through purchased some 2,100 call options at the higher July $85 strike for an average premium of $0.29 a-pop. Shares must increase at least 7.05% in order for July $85 strike call buyers to make money above the effective breakeven point at $85.29 by July 30 expiration day. Bullish sentiment on the Chinese-language ISP spread to the August contract where plain-vanilla call buying continued. Investors paid an average premium of $3.17 per contract to take ownership of some 5,300 calls at the August $80 strike. Meanwhile, bulls bought 2,400 calls at the higher August $85 strike for an average premium of $1.43 apiece. Finally, uber-bulls scooped up 1,300 call options at the August $90 strike for an average premium of $0.63 a-pop. Baidu’s shares must surge 13.75% in order for August $90 strike call buyers to start to accumulate profits above the average breakeven price of $90.63 by August expiration day.
Affiliation: Interactive Brokers
Andrew Wilkinson is the senior market analyst at Interactive Brokers Group, where he provides daily commentary and analysis on U.S. equity options trading throughout the trading day. Andrew provides webinars designed to explain option-related trading scenarios covering futures, fixed income, forex and equities.
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