Get ready tech traders: The Russians are coming
The tech sector’s rally this year began with old familiars of Silicon Valley: Apple (NASDAQ: AAPL), Facebook (NASDAQ: FB), and Amazon.com (NASDAQ: AMZN). Then the bulls crossed the Pacific to double their profits in Chinese upstarts like Alibaba (NASDAQ: BABA) and Weibo (NASDAQ: WB). Now, they seemed to have hopped the Trans-Siberian railway to Moscow.
Yandex (NASDAQ: YNDX) is Russia’s top Internet search company. It’s zoomed up 49 percent so far this year, more than twice the gain of domestic rival Alphabet (NASDAQ: GOOGL), and this week options traders looked for the rally to keep going.
Yesterday's buyers went to work shortly before lunch, amassing 6,800 of the 22-September 31 calls for $0.75 to $0.90. Calls fix the price where a security can be purchased. They can make money to the upside, but lose all their value if no rally occurs. Thursday’s contracts, for instance, will double if the shares rise 9 percent to $32.60 by expiration and triple from an 11 percent run to $33.40. They’ll breakeven around $31.80. What if the stock remains below $31, will they be worth anything then? Nyet!
Traders didn’t stop there. They followed by snagging an additional 2,000 September 29 calls for $1.65 to $1.75. Including activity at other strikes and expirations, that pushed total options volume in the name past 13,000–more than quadruple the average amount in the last month.
Source: OptionsHouse by E*TRADE.
Wait a sec, said some observers with photographic memories. Didn’t the same thing happen the previous session? Yep, there was also a big spike in turnover on Wednesday, led by the November 28 calls. Back-to-back days over 10,000 contracts, both times dominated by upside calls? Eyebrows perk...
YNDX closed up 0.54 percent to $30.01. It broke out to new highs back in late April on the heels of strong quarterly results and leapt a second time in mid-July after agreeing to merge its online taxi business with U.S. ride-sharing giant Uber.1 The stock fell later in the month after quarterly results missed estimates.2
Chart watchers may be spotting an additional thing or two as well. First, YNDX’s August low above $28 was pretty close to its previous peak in May. In other words, old resistance is now support, which is often viewed as a bullish pattern. Second, YNDX has made successively higher lows along its rising 50-day moving average. Could it be… an uptrend?
There’s more, because unless you’ve been trapped in Siberia for the last six months, you probably know that international stocks and emerging markets have been outperforming domestic indexes by a mile.
Traders looking to play the rising tide also have few Russian alternatives besides YNDX because most other stocks from the country barely see any kind of options activity. The closest runner up, if you’re interested, is telecom provider Mobile TeleSystems (NYSE: MBT), which averages just 2,000 contracts a day.
Bottom line: Tech and global have been hot, and now traders are logging on to YNDX.
1. Reuters: Yandex raises revenue forecast, talks up dividend prospect. 4/27/17. Fortune: Uber Will Merge With the ‘Google of Russia’ in 6 Countries. 7/13/17.
2. Bank of America Merrill Lynch: Rock-solid core; taxi losses widen. 7/28/17.