Pinduoduo Options Traders Bet Heavy The Stock Is Headed Higher

Pinduoduo Inc PDD gapped up 6% on Tuesday morning and ran further on news the agricultural-focused Chinese technology company has engaged researchers to study the health impacts of plant-based meats.

On Tuesday data also showed China’s purchasing managers' index for its non-manufacturing sector was up 0.3% from April to 55.2 for the month of May.

Pinduoduo’s stock had been trading in a long daily downtrend that began in February and was made worse when the company reported a fourth-quarter 2020 miss on earnings and received a number of analyst downgrades.

Pinduoduo option traders believe the bottom may be in and bet its stock is headed higher.

Why It’s Important: When a sweep order occurs, it indicates the trader wanted to get into a position quickly and is anticipating an imminent large move in stock price. A sweeper pays market price for the call option instead of placing a bid, which sweeps the order book of multiple exchanges to fill the order immediately.

These types of call option orders are usually made by institutions, and retail investors can find watching for sweepers useful because it indicates “smart money” has entered into a position.

The Pinduoduo Option Trades: Below is a look at the notable options alerts, courtesy of Benzinga Pro:

• At 9:30 a.m., Tuesday a trader executed a call sweep, near the ask, of 215 Pinduoduo options with a strike price of $125 expiring on July 16. The trade represented a $271,975 bullish bet for which the trader paid $12.65 per option contract.
• At 10:16 a.m., a trader executed a call sweep, near the ask, of 3500 Pinduoduo options with a strike price of $160 expiring on July 2. The trade represented a $735,000 bullish bet for which the trader paid $2.10 per option contract.
• At 10:24 a.m., a trader executed a call sweep, near the ask, of 1500 Pinduoduo options with a strike price of $135 expiring on June 25. The trade represented a $1.05 million bullish bet for which the trader paid $7.00 per option contract.
• At 10:36 a.m., a trader executed a call sweep, near the ask, of 504 Pinduoduo options with a strike price of $150 expiring on June 18. The trade represented a $108,360 bullish bet for which the trader paid $2.15 per option contract.
• At 10:43 a.m., a trader executed a call sweep, at the ask, of 2335 Pinduoduo options with a strike price of $152.50 expiring on June 18. The trade represented a $420,300 bullish bet for which the trader paid $1.80 per option contract.
• At 11.01 a.m., a trader executed a call sweep, near the ask, of 544 Pinduoduo options with a strike price of $155 expiring on Oct. 15. The trade represented a $560,320 bullish bet for which the trader paid $10.30 per option contract.
• At 11:14 a.m., a trader executed a call sweep, above the ask, of 875 Pinduoduo options with a strike price of $143 expiring on June 18. The trade represented a $385,000 bullish bet for which the trader paid $4.40 per option contract.
• At 11:22 a.m., a trader executed a call sweep, at the ask, of 1939 Pinduoduo options with a strike price of $147 expiring on June 4. The trade represented a $217,168 bullish bet for which the trader paid $1.12 per option contract.
• At 11:27 a.m., a trader executed a call sweep, near the ask, of 833 Pinduoduo options with a strike price of $142 expiring on June 18. The trade represented a $462,315 bullish bet for which the trader paid $5.55 per option contract.
• At 12:07 p.m., a trader executed a call sweep, above the ask, of 864 Pinduoduo options with a strike price of $155 expiring on July 16. The trade represented a $393,120 bullish bet for which the trader paid $4.55 per option contract.

PDD Price Action: Shares of Pinduoduo were trading up 13% to $141.26 at publication time.