Baidu, Inc. (BIDU) – Shares of China’s largest Internet search engine are up 1.55% in early afternoon trading to stand at $101.56, but earlier in the session the stock surged more than 2.75% to touch an intraday high of $102.78. A number of investors appear to be positioning for Baidu’s shares to continue higher ahead of the firm’s third-quarter earnings announcement after the closing bell this evening. Options traders populating the stock are trading more than 2.1 call options on BIDU for each single put option in play thus far today. Yesterday Kaufman Bros. raised their share price target and third-quarter revenue estimate on Baidu. Analysts at Kaufman upped the BIDU’s target price to $115 from $85 and maintained a ‘buy’ rating on the stock and said they anticipate the firm will exceed a Q3 revenue forecast of $333 million by as much as 3 percent. Some bullish players are employing debit call spreads in the November contract ahead of earnings. More than 5,000 calls changed hands at the November $110 and November $120 strikes. It looks like a good portion of those calls were utilized to construct call spreads that cost investors an average net premium of $2.32 per contract to establish. Traders long the bull call spread make money if BIDU’s shares jump 9.3% over today’s high of $102.78 to surpass the average breakeven price of $112.32 by November expiration. Maximum potential profits of $7.68 per contract are available to call spreaders should BIDU’s shares surge 16.75% to exceed $120.00 by expiration day next month.
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