Options Volume Runs Hot as Weibo Stock Sinks

Worries over China's economy and a bearish brokerage note are pressuring WB

The shares of Weibo Corp (NASDAQ:WB) are spiraling today on concerns over slowing Chinese economic growth. A downgrade to "neutral" from "buy" at Nomura Instinet is only exacerbating headwinds, with the brokerage firm also cutting its WB price target to $61 from $74. At last check, the stock is down 11.7% at $53.67, and options volume is accelerated.

By the numbers, around 6,000 calls and 4,800 puts have changed hands, three times what's typically seen at this point in the trading session. Most active are the weekly 1/25 52-strike put and 57-strike call, and it looks like new positions are being purchased at each option. While put buyers expect today's selling to continue through this Friday's close, call buyers are betting on a quick rebound during the holiday-shortened week.

More broadly, options buyers have preferred calls over puts in recent weeks. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), Weibo sports a top-heavy 20-day call/put volume ratio of 1.80.

Some of this recent call buying could be a result of shorts using options to hedge against any upside risk. Short interest on WB surged 13.4% in the two most recent reporting periods to 6.88 million shares, representing 13.5% of the equity's available float, or 3.5 times the average daily pace of trading.

Looking at the charts, short sellers have been firmly in control, with the Chinese social media stock down 59% year-over-year. More recently, WB's 80-day and 100-day moving averages have emerged as stiff resistance, keeping the shares churning near their Oct. 30 17-month low of $53.11.