Sohu.com (NASDAQ:SOHU) is a holding company with principle assets in wholly owned subsidiaries such as Sohu ITC Information Technology, Beijing Sohu New Era Information Technology, Beijing Sohu Interactive Software, Kylie Enterprises Limited and All Honest International Limited, and its variable interest entities, Beijing Sohu Internet Information Service and Beijing Sohu Online Network Information Services. The company and its variable interest entities offer content, advertising, e-subscription and e-commerce services through the Internet portal sites, Sohu.com, Chinaren.com, focus.cn and 17173.com, which are marketed to clients primarily in the People's Republic of China.
Chinese Internet stocks have rallied in recent weeks in the wake of Shanda Interactive's (NASDAQ:SNDA) increased ownership stake in Sina (NASDAQ:SINA). Nearly all of the stocks in the group have received new attention from technology investors and a number of issues have been upgraded due to valuations at current price levels. In addition, a technical "bottom" appears to be in place near the sold (put) strike in this position and the bullish momentum has pushed SOHU's share value back above a previous trading range near $17-$18.
As of Friday's close, the bid/ask spread for the suggested option is $0.20 X $0.35. However, the ongoing speculative activity among put buyers and the moderate open interest should allow at least a few orders to be executed at the target credit. If the open interest was higher (more liquidity), we would recommend a 10-contract position. But, we also want all our readers to be able to participate in the play and larger order sizes would limit that ability. Since we will be using time and sales data for entry prices and volume, there should be no problem establishing the viability of the position for the OW Portfolio. At the same time, we may need a few readers to forward the results of any "filled" orders to supplement this process. Please let us know if you are able to make the trade at: Contact Support
Sell Put APR 15.00 UZK-PC
Target Price = $0.25 Open Interest = 140
Potential Profit (5 contracts) = $125
Initial Margin (5 contracts) = $2,035
Return on Investment (max) = 4.7%
Cost Basis in Stock = $14.75
Days to Expiration = 40