Alibaba shares have rallied for three days straight, and some traders are betting the stock will close the week even higher.
China's e-retail giant saw nearly 8 percent gains since Tuesday. They were further given a boost on Thursday after analysts at Bernstein initiated coverage on Alibaba with a "high-conviction outperform" rating and a price target of $120. The stock closed Thursday at $93.88 and some traders are betting it will move higher on Friday.
Specifically, some 20,000 of the weekly 95-strike calls were bought for 25 cents each. As each contract controls 100 shares, the traders wagering $500,000 that Alibaba will trade above $95.25 or 1.5 percent higher on Friday. A call is a bullish bet giving purchasers the right to buy a stock at a set price within a specific time frame.
The stock has stumbled since it traded at $120 in November. Alibaba's subsequent $590 million investment in a Chinese smartphone-maker did not quickly move the stock as many investors had hoped, according to options expert Mike Khouw.
"Everybody thought that Meizu acquisition back in February was going to be the propellant to take this stock higher," Khouw said.