Huge UOA in Alibaba 3 Days Before Split News

Rebel Hub Education

by

Justin Nugent

March 30, 2023
at 7:38 PM

Sometimes, the unusual options activity speaks for itself.

Market Rebellion identified this unusual bullish call trade in Chinese Amazon rival Alibaba (BABA) on March 24th, with the stock at just $87.09. This trade, which cost roughly $800,000 to make, was set to expire just 7 days after it was opened, on March 31st.

We knew that this was fresh buying when we saw that the open interest was just 1,054 on the day of the trade. At the time, there was no obvious impetus for this trade. However, when Market Rebellion spots massive unusual options activity without any obvious cause, we start paying close attention.

Then, just four days later, the news broke.

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Alibaba Splits into 6 Pieces

The game changing news:

Chinese e-commerce company Alibaba has restructured into a holding company with six business units, a move that could signal the break-up of the country’s biggest e-commerce firm. The restructuring allows each business unit to have its own CEO and board of directors to facilitate quicker decision-making, while they will be able to seek outside capital with a view to potential IPOs.

The restructuring is seen as an attempt to ease concerns about the concentration of power among China’s tech giants. The move could also protect the company from future regulatory action. On the day of the news, Alibaba shares rose over 14%, and the stock has continued to rise throughout the week.

The stock rose 14% immediately, and continued to rise throughout the week.

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Result: Options 8X in Value

Recall that the 4,400 options shown above were purchased for an average price of $1.81. As of Thursday March 30th, those options have traded for as high as $15.06 in value — a more than 8X multiple from their original value. That brings the total value of the trade up to over $6.6 million.

That’s the magic of unusual options activity. Discover what unusual options activity we’re seeing today inside UOA Essential.

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