BABA Trade

Alibaba Group Holding Ltd. (BABA)

Lot 2

Update 9/14/2021: I exited my bear call spread position on BABA 31 days before expiration, for a $0.99 debit per contract/share, a profit before fees of $138 per contract. Shares were trading at $162.31, down $8.61 from the entry level. The Implied Volatility Rank stood at 47.0% at exit, up 8.9 points from the entry level.

My decision to exit was based on the credit falling to greater than 50% of maximum potential profit.

Shares declined by 5.0% over 11 days for a -167% annual rate. The options position produced a 139.4% return for a 4,625% annual rate.

I have entered a short bear call spread on BABA, using options that trade for the last time 42 days hence, on October 15.

The premium is a $2.37 credit per contract share and the stock at the time of entry was priced at $170.92.

The implied volatility rank (IVR) stands at 38.1%.

Premium: $2.37 Expire OTM  
BABA-bear call spread Strike Odds Delta
Long 200.00 90.0% 13
Break-even 187.37 83.0% 21
Short 185.00 76.0% 29

The premium is 31.6% of the width of the position’s wing.

The profit zone covers a 9.6% move to the upside.

The risk/reward ratio is 5.3:1, with maximum risk of $1,263 and maximum reward of $237 per contract.

By Tim Bovee, Portland, Oregon, September 3, 2021


Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

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