Alibaba Group Holding Ltd (BABA) Options Trade Set for Market Debut Amid Strong Demand

Alibaba Group Holding Ltd (NYSE:BABA)

After claiming the world’s biggest IPO tag, Alibaba Group Holding Ltd (NYSE:BABA)’s stock options will make their market debut on Monday. Experts are speculating that the initial period would be busy, pricey, and even choppy.

Option traders are expecting heavy Puts and Calls for Alibaba after its extraordinary IPO collection. Alibaba Group Holding Ltd (NYSE:BABA) has been the most active stocks since its debut with average stock trade of 40 million per day. J.J. Kinahan, chief market strategist at retail brokerage TD Ameritrade Holding Corp, said, “I would expect Alibaba’s options to have a built-in demand, so to speak, as obviously all the people who want to get into the IPO at the beginning didn’t.”

Alibaba Group Holding Ltd (NYSE:BABA)

All the major U.S. options exchanges are likely to list Alibaba on September 29 including the Chicago Board Options Exchange, ISE and ISE Gemini, and the C2 Options Exchange. The exchanges are expecting a huge demand form hedgers and speculators having an eye on every single movement of Alibaba’s shares, although some experts think that it will not trade with the same interest as in case of Facebook Inc (NASDAQ:FB) in May 2012.

Brian Overby, senior options analyst at TradeKing in Charlotte, North Carolina, said that trading Alibaba Group Holding Ltd (NYSE:BABA)’s options would be tricky initially and with a $90 stock price, Option prices are likely to mount up. He further added, “At the start there will most likely be wide bid/ask spreads on the option contracts until the market makers have some price discovery.”

Further Alibaba Group Holding Ltd (NYSE:BABA) is likely to have high implied volatility. Ophir Gottlieb, chief executive officer at Capital Market Laboratories LLC, Los Angeles, said, “Amazon.com Inc (NASDAQ:AMZN) trades with an implied volatility of 27 percent. I would expect Alibaba to trade above that level for some time.”

Earlier, Alibaba Group Holding Ltd (NYSE:BABA) made a record debut with $25 billion raised in its first public offering and the company dwarfed tech companies including Amazon.com, Inc (NASDAQ:AMZN) in terms of market capitalization.

This article has been written by Prakash Pandey.

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