Covered call BABA...What don't I see??

C

Cabin111

I've owned Alibaba twice...Did covered calls both times and it got called away. My wife doesn't want to pull the trigger again on it this time. She is very smart and a better investor than I am...Like buy and hold Lowe's and QQQ.

If I had cash on the sidelines, I would buy BABA at about $225. I would then do a covered call for the Jan 22 at $230. and I would get over $39. for the call. If BABA is at $186. in Jan 22, I am still ahead of the game. They haven't sent Ant public yet. They are into everything. Jack is a member of The Communist Party...They will work something out. I see value here (I'm a value investor). Pay off some members, sell off some assets (to open up competition) and divest what you need to. Keep your mouth shut and make some money. BABA is a worldwide company. Do you see value here??
 
I like BABA, but would go with FXI instead. I've been moving more money into foreign stocks (EEM, INDA, FXI, etc) which I expect will outperform for a while. Wish I just bought and held EWY a few months ago...damn. Selling puts and covered calls was not the right strategy for that one.
 
ET180 said:
I like BABA, but would go with FXI instead. I've been moving more money into foreign stocks (EEM, INDA, FXI, etc) which I expect will outperform for a while. Wish I just bought and held EWY a few months ago...damn. Selling puts and covered calls was not the right strategy for that one.
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I looked at FXI before. I just don't like the China banks...House of cards.
 
That is a lot of cash to tie up for a year. Why not a diagonal, buy three of the Jan of 22 and start selling 2 contracts near term to pay them off and leave yourself the optionality of capturing the up move. (I have not analyzed the payoffs, just brainstorming.)

Disclosure: I have been in BABA since $85 a share.
 
on a risk adjusted basis blindly selling baba options is not a good trade even if its a covered call. You can go look at realized vs implied.
 
If you would kindly indulge me with a newbie question. Based on the OP question, how much money would be made from that option trade if all goes according to plan?
I only trade stocks because options sound like a foreign language to me and have been day trading BABA since the recent drop, although I'm now holding for a climb to 260 before selling again. I've made about 15k so far although I have 2000 shares still in the game.
I guess I'm trying to figure out what the returns difference would be between day trading and options trading... thanks.
 
Cabin111 said:
I've owned Alibaba twice...Did covered calls both times and it got called away. My wife doesn't want to pull the trigger again on it this time. She is very smart and a better investor than I am...Like buy and hold Lowe's and QQQ.

If I had cash on the sidelines, I would buy BABA at about $225. I would then do a covered call for the Jan 22 at $230. and I would get over $39. for the call. If BABA is at $186. in Jan 22, I am still ahead of the game. They haven't sent Ant public yet. They are into everything. Jack is a member of The Communist Party...They will work something out. I see value here (I'm a value investor). Pay off some members, sell off some assets (to open up competition) and divest what you need to. Keep your mouth shut and make some money. BABA is a worldwide company. Do you see value here??
More...
VicBee said:
If you would kindly indulge me with a newbie question. Based on the OP question, how much money would be made from that option trade if all goes according to plan?
I only trade stocks because options sound like a foreign language to me and have been day trading BABA since the recent drop, although I'm now holding for a climb to 260 before selling again. I've made about 15k so far although I have 2000 shares still in the game.
I guess I'm trying to figure out what the returns difference would be between day trading and options trading... thanks.
More...

I got Ds in math...I have a BA and am smart, but see things differently. I was ADHD...Could recite a whole album and am good at Jeopardy, but math and art, good luck. I'll take a stab.

Assume it will be one year...Annualized return. Bought 100 shares of BABA for $22,500. Sold it a year from now at $23,000...$500. profit. The option money is $3,900.+$500.=$4,400. $4,400 divided by $22,500.= 19.55% return on the money. If I took the $3,900. and put it into something earning 1% or so, I would get over a 20% return on the money. A LOT OF IFS THERE...
 
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