IQ Unusual Option Activity Report
IQIYI Inc ADR (NASDAQ: IQ) is a Chinese online entertainment company that offers video games, online games, live broadcasting, social media platform, etc. The success of iQIYI's live action adaptation of “Hikaru no Go” made news yesterday. The first episode gained significant acclaim internationally and is shows the quality of iQIYI's content production.
That sounds nice, but what does this mean for trading? IQ dropped dramatically following its last earnings report, despite beating analyst estimates by 40%. Following the report, fiscal year 2020 EPS was also positively revised from a loss of $1.71 to a loss of $1.57. The stock declined on the report of a small decline in subscribers and ad revenue.
This type of post-earnings movement happens all of the time and many times the positives will start to weigh more positively in the stock after the decline. This is what may be happening with IQ as the price establishes support and the surge in call option buying on Wednesday.
IQ Option Activity
Wednesday’s option volume for IQ was over 1.25 times the average. Put volume finished only 0.29 times the average compared to call volume coming in at 1.57 times the average. The activity was decidedly more bullish with more call volume and most of the interest getting filled at the ask. Here’s a breakdown the unusual option activity:
- 13,000 31 DEC 20 $25 calls mostly BOT @ $0.52 to $0.73 against open interest of 1,205
That is a lot of size that came into that strike and today the open interest is 8,133. That is an indication of the how much of the interest yesterday held overnight.
IQ Technicals
The price of IQ has recently established support near previous support around $22. On November 27, the price gapped below the support, but rallied to close higher on significant volume. The next day, the price closed above the previous day’s high on higher volume as well. This is representative of buyers coming in at this level.
As you weigh the near-term potential, there is previous resistance at the 50% retracement of the recent sell-off near $24.75. This would be a reasonable short-term target, not only based on price but was also aligns with the strike price chosen at $25.
Conclusion
The unusual option activity on IQ helps to draw your attention to potential that some traders see in the stock. The alignment of the technicals, option selection and recent news makes this stock interesting as a candidate.
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