Free Trial

Options Traders Bet Big on These 3 Tech Stocks

Options Traders Bet Big on These 3 Tech Stocks

Key Points

  • As new call option trades are being made around Alphabet, Robinhood, and PayPal, investors need to reverse engineer these trades for profit.
  • Wall Street analysts have reiterated their sentiment on these stocks through increased price targets and ratings.
  • As inflation rises and traditional managed funds underperform, more retail investors are turning to platforms like Robinhood for direct market access.
  • 5 stocks we like better than Alphabet.

Investors have several ways to gain exposure to a stock’s price movement, with the most popular being to simply buy shares. However, there's also a method that can limit downside risk and significantly boost profit potential—if a few key conditions are met. Specifically, getting both the direction and timing right. Stock options can increase upside and limit downside, but their value depends on choosing the correct direction and acting within the option’s expiration date.

Knowing this, you can see how unusual options trading activity can signal a sort of aggressive conviction toward a stock and its perceived move, as well as the timing of such a move. Recently, three technology stocks showed such unusual trading activity: Alphabet Inc. NASDAQ: GOOG, Robinhood Markets Inc. NASDAQ: HOOD, and PayPal Holdings Inc. NASDAQ: PYPL

1. Alphabet's Upside: Wall Street and Options Traders Are Aligned

Alphabet Today

Alphabet Inc. stock logo
GOOGGOOG 90-day performance
Alphabet
$177.33 -2.25 (-1.25%)
(As of 11/20/2024 ET)
52-Week Range
$129.40
$193.31
Dividend Yield
0.45%
P/E Ratio
23.52
Price Target
$200.56

Recently, Google-parent company Alphabet shares rose by over 10% after the company reported its quarterly earnings results, giving markets another reason to stick by this household technology name. However, as the market encountered volatility in the following days, GOOG gave back most of its quick gains.

However, this recent bearish momentum failed to drive away investors or deter Wall Street analyst sentiment. More importantly, it failed to attract new short sellers to carry the stock lower. Over the past month, Alphabet stock’s short interest declined by as much as 3.6%, showing signs of capitulation from the short sellers.

Perhaps leaning on these bullish factors, Wall Street analysts recently reiterated their views on Alphabet stock, particularly those at Pivotal Research, who kept a Buy rating on the stock alongside a price target boost to a high of $225 a share. To prove these new targets right, Alphabet stock would need to rally by as much as 31.5% from where it trades today.

That’s only half the equation, though, as if no new buyers come in, then there’s nothing to celebrate just yet. Last week, 279,082 call options contracts were bought in a multi-million dollar transaction betting on Alphabet stock, reclaiming all the post-earnings rallies and then some in the not-so-distant future.

2. Robinhood: Analysts Forecast Double-Digit Gains; Options Buyers Show Renewed Interest

Robinhood Markets Today

Robinhood Markets, Inc. stock logo
HOODHOOD 90-day performance
Robinhood Markets
$36.08 +0.84 (+2.38%)
(As of 11/20/2024 ET)
52-Week Range
$7.96
$38.11
P/E Ratio
61.15
Price Target
$28.66

As inflation pressures rise, traditionally managed funds may struggle to outperform inflation. This could drive more retail investors to manage their own capital and invest on a discretionary basis. This is where Robinhood’s mission to democratize the financial markets comes into play, and now more than ever.

The results of this trend can be seen in the company’s financials, where revenue and cash flow growth are pushing double-digits each quarter as more and more people sign up for the platform and fund their accounts.

Knowing that the platform is highly likely to deliver another hot quarter in the coming months, call options traders went in to buy ahead of the release, this time by taking up to 174,025 contracts off the market in a sizeable bet that will pay off in the near future, as long as their thesis is right and Robinhood stock can deliver a significant rally.

Wall Street analysts think the stock can get it done, especially those at JMP Securities, who recently reiterated their Market Outperform rating for Robinhood, this time with a $33 a share price target—suggesting up to 38% upside from its current price and a potential new high for the year.

3. PayPal: Call Option Traders Are Buying the Dip

PayPal Today

PayPal Holdings, Inc. stock logo
PYPLPYPL 90-day performance
PayPal
$84.74 +0.65 (+0.77%)
(As of 11/20/2024 ET)
52-Week Range
$55.28
$87.92
P/E Ratio
20.22
Price Target
$83.45

After shares of PayPal sold down by as much as 7% from their recent highs, some in the stock market think that there aren’t too many reasons to stay bearish on PayPal stock today. Options traders and Wall Street analysts don’t see the recent drawdown from highs as a reason to change their minds.

After the dip, up to 107,187 call options were bought last week as a bet that PayPal stock will swiftly make its way back up to its recent highs and erase some of the selloff effects. Then, there are the implications from Wall Street analysts, especially from those at Macquarie, who recently boosted their valuations on PayPal to $95.

To achieve these new price targets, PayPal stock would need to deliver investors a run of as much as 23% from today’s price. Even so, PayPal would still be a fraction of what it was only a couple of years ago when the stock reached its high of just over $300 a share.

Should you invest $1,000 in Alphabet right now?

Before you consider Alphabet, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Alphabet wasn't on the list.

While Alphabet currently has a "Moderate Buy" rating among analysts, top-rated analysts believe these five stocks are better buys.

View The Five Stocks Here

Metaverse Stocks And Why You Can't Ignore Them Cover

Thinking about investing in Meta, Roblox, or Unity? Click the link to learn what streetwise investors need to know about the metaverse and public markets before making an investment.

Get This Free Report
Gabriel Osorio-Mazilli
About The Author

Gabriel Osorio-Mazilli

Contributing Author

Value Stocks, Asian Markets, Macro Economics

Like this article? Share it with a colleague.

Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
PayPal (PYPL)
4.5948 of 5 stars
$84.74+0.8%N/A20.22Moderate Buy$83.45
Alphabet (GOOG)
4.7755 of 5 stars
$177.33-1.3%0.45%23.52Moderate Buy$200.56
Robinhood Markets (HOOD)
4.259 of 5 stars
$36.08+2.4%N/A61.15Moderate Buy$28.66
Compare These Stocks  Add These Stocks to My Watchlist 


Featured Articles and Offers

Recent Videos

’Best Report in 2 Years’: NVIDIA Earnings Crushes Expectations Again
Palantir and the NASDAQ 100: What’s the Next Big Stock Swing for This AI Giant?
Rocket Lab Stock Explodes Higher—What’s Next for This Space Pioneer?

Stock Lists

All Stock Lists

Investing Tools

Calendars and Tools

Search Headlines