BABA - How About A Collar Trade?The green zone is long term support.
The Pitchfork projects path of price, on a Pendulum Swing basis.
The sliding parallel (white) marks the overshoot and projected support.
As we see, the steep down sloping yellow dotted resistance line was broken 5 weeks ago. But that's no reason to rush in. Why not wait for more facts?
Do we have facts now?
Yes, we have.
a) support at the sliding
b) today we see a close above the last high AND a break of the (grey horizontal) resistance.
How can we play this with low risk?
What about a Collar?
1. Buy Stock
2. Buy Put ATM
Optional:
- sell a longer dated Call (potentially limiting stock profit to finance the put)
- sell lesser Calls, to let the rest of the stock position ride, if price close ITM and calls away your (partial) position.
That's just an idea how to play it save.
Why save? What if BABA tanks?
- sell Put profit and buy more stocks to bring down the cost basis. Repeat until B/E or in profit. Additionally you can sell more Calls if they are above calculated cost basis.
Highest Risk: If the stock go to zero, then the initial investment of stocks is gone. Could it happen? Yes. High chance of happening? Don't think so.
Would love any input about this idea.
Happy weekend §8-)
