Alibaba Call Options Surge, New Hopes of a Trade Deal?

Key Points

• An unusual amount of call option buying took place recently for shares of Alibaba, as investors bet that the company may have a new reason to rally in the coming months.
• Being one of China's blue-chip companies puts Alibaba at the front of the line for an inevitable rotation.
• This Wall Street analyst thinks that there is high double-digit upside from where the stock trades today.

Every investor in today’s market has had to deal with the ongoing uncertainty that trade tariffs have brought on for the S&P 500 index and other specific stocks. Specifically, the retail sector has been handed the harshest environment for businesses to operate in, with uncertainty about whether previous inventory management measures will suffice for the months to come as cost and price uncertainty rise.

If the United States carries these symptoms, then those companies in the Chinese stock market have it that much worse, considering that the bulk of the overall tariffs have been applied to Chinese imports, which greatly disrupts the status quo for this global trade scene and the future of these companies.

However, current intentions to land a deal sooner rather than later have sparked a newfound interest among investors to seek exposure to this rebound opportunity.

Honing in on what investors like today, it becomes clear that most of the attention landed on shares of Alibaba Group NYSE: BABA, but not just any type of attention. Smart investors understand that any rebound in the Chinese stock market will likely benefit Alibaba before most other Chinese stocks, considering that the company is one of the nation’s leading blue-chip companies.

Why Options Volume Matters for Alibaba

Buying a stock outright is one thing, but plunging into options contracts is a completely different world. Spotting an unusual amount of call option buying for Alibaba means these traders are now signed up for two main caveats that come along with any options position.

The first is the concept of leverage, as these instruments significantly amplify profit and loss swings with lower capital requirements than buying an equivalent amount of stock. Then there is the fact that these contracts have an expiration date, so these traders now have to beat the clock and hope they are right in their timing as well.

Considering these two factors, it sends a very clear (and strong) message to investors, especially as just under 1.4 million call options were bought as of early June 2025, significantly above the usual volume of 319,800, pointing the market in the direction of unusually high conviction for Alibaba.

Now, investors need to find the right narrative to justify the potential upside path that Alibaba stock can take from here, thereby justifying the high-stakes decision made by these options traders recently.

A Fantastic Risk-to-Reward Setup on Alibaba

Because the stock now trades at only 78% of its 52-week highs, today’s prices don’t really reflect the fact that Alibaba is much more than just a retail company and, therefore, not as exposed to the current trade tariffs being slapped on China. Alibaba also generates millions in revenue through cloud computing and other software solutions under its umbrella.

Due to this diversification, maybe some of these traders figured out that any whiff of optimism might see a capital rotation to Alibaba before any others in the Chinese stock market, and considering today’s discounts, that could create a significant upside opportunity.

In fact, Loop Capital analyst Fawne Jiang decided to place a new valuation on Alibaba stock as of mid-May 2025. Considering that the company now trades in an official bear market according to Wall Street’s definition (a 20% or more sell-off from recent highs), seeing Wall Street analysts boost it means a great deal more than usual.

This time, the analyst’s fair valuation is set at a high of $176 per share, representing a potential rally of up to 53% from its current level. While this might seem like a bold call, investors need to take a step back from the past 12 months of price action in Alibaba stock.

The company’s all-time high price was set a few years ago at just over $310 per share, making that $170 per share valuation seem a little less of a stretch compared to that previous high. Considering that most of the risks surrounding tariffs and the tense relationship between the United States and China are now largely behind us, this target may soon become a reality.

This Loop Capital analyst wasn’t alone in this bullish view for Alibaba, as seen in the massive $4.7 billion worth of institutional capital that justified its way into Alibaba stock as of the most recent quarterly reports, signaling even more confidence from the smart money side of the equation for investors to lean on in the coming months.

Ultimately, the thesis rests on the fact that China’s economy will inevitably rebound, taking its stock market along with it. As investors now know, Alibaba is one of the blue-chip stocks that stand in front of the line to receive the attention and capital it deserves.