Options Traders Blast Red-Hot Baidu Stock

The shares of Baidu Inc (BIDU) scored a new annual high today, racing out to $220.10 out of the gate this morning. The equity is on track for its third-straight day in the black, guided upwards by its 10-day moving average, and is posting an impressive 52.8% lead in the last monthly period. This bullish flag pattern was aided by a sizable bull gap on Dec. 15, but has resulted in BIDU’s 14-day Relative Strength Index (RSI) of 84 —firmly in “overbought” territory — which means a short-term breather may be imminent.

Don’t tell that to options traders though. The red-hot end to 2020 has options volume running at five times what’s typically seen at this point and pacing for the top percentile of its annual range. More specifically, 155,000 calls and 23,000 puts have crossed the tape so far. The weekly 12/31 205-strike call, where new positions are being opened, is the most popular by a long shot.

Analysts are almost entirely bullish on BIDU, with 10 of the 11 at a “strong buy” rating, and the remaining one a “hold.” However, the 12-month consensus price target of $185.35 is currently a 12.8% discount to current levels, meaning some price-target hikes could be on the horizon if these gains hold.

Yet shorts have been building positions, with short interest up 40.1% during the two most recent reporting periods. Currently, the 9.75 million shares sold short accounts for 3.6% of the stock’s available float, or two days’ worth of pent-up buying power.

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Schaeffers Investment ResearchSchaeffer’s Investment Research


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