Credit: Shutterstock photoE-Commerce China Dangdang has been consolidating after a big rally, and the bulls are coming back.
optionMONSTER's Heat Seeker monitoring program detected the purchase of 3,000 March 10 calls today, most of which priced for $0.75. Volume surpassed the previous open interest of 2,017 contracts, indicating that new positions were initiated.
These long calls lock in the price where a stock can be purchased, providing cheap exposure to gains. They can also generate significant leverage if a rally occurs. (See our Education section)
DANG is up 7.69 percent to $9.52 in afternoon trading. The Chinese bookseller began May under $4, shot to $12 by mid-August, and has been fluctuating in a range since. But it's been making higher lows since November, which could lead some chart watchers to think that the stock is getting ready to run again.
The company has also significantly underperformed rival Vipshop, and an analyst at China's iDoNews recently said it's trading at half of fair value. (See researchLAB for a translation of the report .)
Total option volume was twice the daily average, with calls outnumbering puts by a bullish 130-to-1 ratio.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
