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

Discussion in 'Options' started by Cabin111, Jan 12, 2021.

  1. 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??
    .sigma likes this.
  2. ET180


    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.
  3. Cabin111


    I looked at FXI before. I just don't like the China banks...House of cards.
    .sigma likes this.
  4. 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.
    .sigma likes this.
  5. traider


    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.
    .sigma likes this.
  6. VicBee


    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.
  7. BKR88


    IMO, Jack Ma would be in jail if he wasn't such a popular public figure in China.
    China could make any company state-owned if they wanted to.
    Stock fell 15% in 1 day recently. Too much friction between China & U.S..
    Ant is too important in the finance world and that bothers China.
  8. Bekim


    Im playing this buying the JAN 22 300 calls and selling the March 21 300 calls
  9. Cabin111


    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...
    ET180, .sigma and VicBee like this.
  10. .sigma


    I’d only do this if my net liq was over a Millie, other than that there’s way better methods for deploying risk capital
    #10     Jan 13, 2021
    vanzandt likes this.