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Why Airbnb Stock Skyrocketed Wednesday

By Rich Smith - Dec 16, 2020 at 11:56AM

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Traders bet that what went down just has to go back up.

What happened

Investors in new IPO and vacation rental website Airbnb ( ABNB 1.83% ) have had a rough week so far, as their shares continued to tumble from a post-IPO high of $165 hit last week, finally ending below $125 last night. But the morning dawned bright today.

As of 11:30 a.m. EST, Airbnb stock is up nearly 12%.

Four wavy arrows zooming up

Image source: Getty Images.

So what

Why is Airbnb up? Well, the macroeconomic news today is broadly positive, with coronavirus vaccines continuing to roll out across the country, the FDA approving a $30 at-home test for COVID-19, and Congressional leaders reportedly getting close to approving a $900 billion stimulus package that will reportedly include a second round of stimulus checks being mailed out to taxpayers.    

The first two developments promise to make progress toward ending the pandemic that pushed America's economy into recession, while the latter could put more money in vacationers' pockets, such that once travel restrictions are lifted, they'll have more cash to spend on vacations -- and Airbnb rentals.

Now what

All of this, of course, has investors feeling optimistic about Airbnb, and as StreetInsider.com reports today, traders in particular are buying call options on the stock at 2.4 times the rate they're buying puts. That means that among folks who trade stock options, 2.4 times as many of them think that Airbnb stock is going to go up over the next 30 days, as opposed to down.

Options trading may not be the best way to invest for the long term, granted. But it does suggest that investors are broadly bullish on the stock again today -- and that Airbnb's stock may now be ready to turn around and push back toward the highs it hit immediately following its IPO.

How long it takes to get there, though, remains to be seen.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

Airbnb, Inc. Stock Quote
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