A Brief Look at the First Day of Option Trading for BABA

The first trading option trading day for Alibaba (BABA – 88.75) is in the books and it was quite a day. Over 122,000 contracts traded which means BABA was the 10th most actively traded equity option market. Activity was pretty balanced between calls and puts with 53% of the volume on the call side and 47% in put options. For the moment the near dated series is the standard October contracts and the 87.50 and 90.00 strike calls and puts all finished the day with implied volatilities in the 33 to 34 range.   Finally, note the table below that shows the high-low range for BABA’s stock for each day since going public.

BABA Range

I found it interesting that the narrowest range for the stock coincided with the first day of trading for options on BABA.  Despite implied volatility in the mid 30’s, I came across several straddle and strangle buyers today. One example – BABA was at 89.05 this morning, a trader came in and paid 7.40 for the BABA Dec 90 Puts and 6.50 for the BABA Dec 90 Calls or a net 13.90 for the Dec 90 Straddle.