You said "what happens when stock drops 16% tomorrow". On what foundation you base your prediction. Obviously it did come true. Just like i would say, something will fall on you head tomorrow, what are you going to do...
Whats your reasoning for this trade? How profitable is this trade in the long run? selling this condor because its super wide does not support a good trade. Since you think stat vol will be low over the course of this trade ("BABA won't move 20% in 3 months"), do you have an exit strategy when BABA does move 20% after this earnings? Just somethings to think about. good luck
The reason: the next 2-3 months, the underlying will move with in it's historical range. Standard iron condor mitigation is in play. If you're concerned with stock price spiking down 16%, you don't understand iron condor, fyi the call side will increase, and visa versa. Ever heard of retracement? It's a simple ic strategy we all should master.
Why didn't you buy a wide butterfly then and delta hedge? The risk reward is much better and you sell all that expensive Vega you are talking about.