Alibaba is Hot Today but BABA Calls are Hotter

It is another beautiful Tuesday and we continue our options trading activities as we explore the options of Alibaba Group Holding Limited (NYSE:BABA). Alibaba with its market capitalization of $256.37B is an online and mobile commerce company. Alibaba is no longer a stranger in the U.S. stock market as it recently drew attention with an IPO that turned out to be the largest IPO ever in the market.

Alibaba has a hand in every pie inasmuch as ecommerce is concerned especially in China. For instance, the Company operates its ecosystem as a platform for third parties. The Company operates Taobao Marketplace, China’s online shopping destination, Tmall, China’s third-party platform for brands and retailers and Juhuasuan, China’s group buying marketplace.

In addition to its three China retail marketplaces, the Company operates Alibaba.com, China’s global online wholesale marketplace, 1688.com, its China wholesale marketplace, and AliExpress, its global consumer marketplace, as well as provides cloud-computing services.

Why We Are Looking At Alibaba Today

Shares of Alibaba are trading up 2.93% to $104.78, after making an intraday high of $104.98. It might also interest you to know that today’s intraday high also marks a new 52-week high for the stock. Interestingly, shares of Alibaba have gained an impressive 54.38% from an IPO price of $68 per share the stock has gained 13.24% from the first day trading price of $92.70.

Why Shares of Alibaba are Soaring Today

The major reason shares Alibaba are soaring today is the impressive earnings results (opens PDF) for the quarter ending September 30 that the company reported earlier in the day. Highlights of the quarterly results are presented below:

Alibaba reported a 54% increase in Revenue to $2.74B to beat the consensus estimate of $2.61

Diluted EPS in the quarter was a loss of $0.20 on 2,438 million diluted shares outstanding, a decrease of 41.8% compared to same quarter last year

Non-GAAP diluted EPS was $0.45 per share in line with the consensus of $0.45 per share

Gross Merchandise Volume (GMV) in the reported quarter was $90.5B, an increase of 48.7% compared to the same quarter of 2013

Annual Active buyers increased by 52.0% to 307 million annual active buyers in the twelve months ended September 30, 2014 compared to 202 million in the twelve months ended September 30, 2013

Mobile MAUs grew to 217 million in the month ended September 30, 2014, compared to 188 million in the month ended June 30, 2014, representing a net addition of 29 million MAUs in three months, and a 138.5% increase from 91 million in the month ended September 30, 2013

How to Trade BABA Options

From the foregoing, it is obvious that the bullish side of BABA options holds the greatest appeal for option traders; hence, I am buying BABA call options. I recommend buying the BABA Jan 2015 110.000 call (BABA150117C00110000) at an asking price of $4.90. You should consider setting a stop/limit at $4.40 and you should be prepared to raise the stop with every $0.50 gain in the contract.

— Daily Option Alerts

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