BABA Weekly Options Play
Updated
Description
BABA remains in extended downtrend that began 27OCT20, now has rejected new supply line established 20-22OCT.
Technical Indicators:
Using A put debit spread, because profits are always limited by time.
Put Debit Spread
Levels on Chart
SL > 178
*Stops based off underlying stock price, not mark to market loss
The Trade
BUY
11/12 165P
SELL
11/12 140P
R/R & Breakevens vary on fill.
The long call is placed ATM for higher chance of profit,
The short call is placed at last known support.
Earnings on 4NOV are a risk factor.
Manage Risk
Only invest what you are willing to lose
BABA remains in extended downtrend that began 27OCT20, now has rejected new supply line established 20-22OCT.
Technical Indicators:
- Fallen back below 50D EMA
- Bearish MACD convergence
- Supply line Rejection
Using A put debit spread, because profits are always limited by time.
Put Debit Spread
Levels on Chart
SL > 178
*Stops based off underlying stock price, not mark to market loss
The Trade
BUY
11/12 165P
SELL
11/12 140P
R/R & Breakevens vary on fill.
The long call is placed ATM for higher chance of profit,
The short call is placed at last known support.
Earnings on 4NOV are a risk factor.
Manage Risk
Only invest what you are willing to lose
Trade active
My fill is at 3.87.Trade active
Sweet close ITM today, marked at 5.28.Trade active
Back ITM, looking good.Trade active
Marked positive overall today.Beginning to see a bearish cross in the MACD. Could be good.
Note
Where are earnings?Trade active
Looking goodTrade active
Moving stop loss down to daily close over 50D EMA, which is currently @ 167.23 - this event will just force a re-evaluation and a potential re-entry at a better time.I will look to roll these forward as well if the position is still valid come EOD.
Trade active
Rolled these down and out to the 11/19 160/140P's for an additional debit of .83.This brings the total debit to 4.7,
Break-even at 155.3
SL is a daily close > 170
Trade closed manually
Went ahead and closed this out, trying to recover what I can.Filled at 2.9
All of this is time value premium (TVP), because the stock still hasn't made it back down below the strike.
So another way to look at this is what is our break-even for the value in the contracti right now?
With the contract valued at 2.9, and all of this being TVP, the stock would have to fall 2.9 points below the long put, to 157.1, about 4% below the current stock price.
I expect there is a very small chance this could happen, and so I am closing this out today on the increase in IV.
Note
Don't worry, I am imagining.Considering this was never an earnings play, I'm okay with missing this black swan.
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