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Alibaba Group Holding Ltd (BABA)’s Much Anticipated Debut on the Options Exchanges

Alibaba Group Holding Ltd (NYSE:BABA) is all set to debut on US Options Exchanges this Monday, 29th September, as option traders seek to have their share of fun from the hottest internet stock on NYSE since its IPO. M Rochan reported on this much anticipated debut in International Business Times. 1

Rochan mentioned that according to statements released by Chicago Board Options Exchange (CBOE) and ISE Holdings, the derivative contracts on Alibaba Group Holding Ltd (NYSE:BABA) are expected to be listed on CBOE, the C2 Options Exchange, the ISE and ISE Gemini.

The enthusiasm at the options desks is at its peak. Rochan said that option strategists like Fred Ruffy of even expect the trading volume of Alibaba Group Holding Ltd (NYSE:BABA) options to be the highest for the day, once they make their entrance on Monday.

Furthermore, parallels have also been drawn between Facebook Inc (NASDAQ:FB)’s first day on the options market, nearly two years ago and Alibaba Group Holding Ltd (NYSE:BABA)’s upcoming debut. According to Rochan, a senior options analyst at online brokerage TradeKing, Brian Overby expected Alibaba’s option trading volumes on the first day to be about a fourth of Facebook’s when the owner of the renowned social media platform first appeared on the option trading boards.

In fact, Facebook currently holds the record for the first day option trading volume. Rochan said that on its debut, 365,000 options contracts changed hands. Another interesting fact mentioned by the other regarding that historical day was the put-call ratio of the trading volume. Put options were in the lead and exceeded calls by 1.25:1.

Put option is essentially a bet that the price of the underlying stock will go down. The greater the price fall, the more the payoff is for the put option holder. As you can see Facebook’s trading volume record wasn’t exactly a source of pride for the company.

Alibaba Group Holding Ltd (NYSE:BABA) would ideally want to break the trading volume record but not if it comes at the cost of a put-call ratio which is skewed towards a put side. Alibaba’s debut will also give an opportunity to see, which direction investors see the company’s stock price heading in both near and long term future.

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