Options Players, Analysts Jump on Surging JD Stock

JD just reached a strategic deal with AI-specialist Blue Yonder

China-based e-commerce giant JD.Com Inc (NASDAQ:JD) is set for its highest close in over two years this afternoon, up 2.7% at $45.05, after reaching a strategic agreement with artificial intelligence (AI) specialist Blue Yonder, Inc. The two parties plan on working towards providing supply chain transformation solutions for retailers in China.

In response, Morgan Stanley upgraded JD to "overweight" and hiked its price target to $51 fro $39. The analyst said JD is well positioned to weather the economic headwinds the broader market has been facing, due to its abundant cash position and sustainable margin improvement. This sentiment echoes the bullish stance Wall Street has taken, with nine covering analysts calling JD a "strong buy" coming into today, compared to five "hold" ratings. Plus, the consensus 12-month price target of $49.07 is a 9.3% premium to current levels, and represents a region not seen by the stock since 2018.

Despite the recent positive price action JD has been seeing, the options pits have taken a different stance. While the equity's 10-day put/call volume of 0.46 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), indicates that calls are still outnumbering puts on an overall basis, the ratio sits higher than 80% of all other readings from the past year. This suggests a bigger-than-usual appetite for long puts of late.

Looking at today's options activity, 43,000 calls and 23,000 puts have crossed the tape so far -- double what's typically seen at this point. The most popular position is the April 45 call. The April 44.50 put is also seeing some action, with positions being bought to open here.

Considering recent market volatility, JD's options are still relatively cheap right now. The security's Schaeffer's Volatility Index (SVI) of 48% is in the 35th percentile of its annual range. In other words, options players are pricing in relatively low volatility expectations right now.