Alibaba Group Holding Ltd. (BABA)
Update 5/18/2017: BABA gapped sharply to the downside and then partially recovered. I judged it had gone about as far as it could in recovering for the near term, and I exited for a debit of $5.31, or 15.2% of maximum potential profit.
Shares showed a net decline of 2.9% at the time I exited, or a -1,047% annual rate. The options position produced a 17.9% yield on debit for a +6,530% annual rate.
BABA publishes earnings on Thursday before the opening bell.
I shall use the series of monthly options that trade for the last time nine days hence, on May 26.
Implied volatility stands at 34%, which is 2.4 times the VIX, a measure of the volatility of the S&P 500 index.
BABA’s IV stands in the 63rd percentile of its annual range and the 98th percentile of its most recent broad movement.
The price used for analysis was $121.56.
The premium is 50% of the width of the position’s wings.
The risk/reward ratio is 1.1:1.
Decision for My Account
I have entered a position on BABA as described above. The stock at the time of entry was priced at $121.32.
By Tim Bovee, Portland, Oregon, May 17, 2017