When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but, on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline.
Tech Alert - Alibaba Group Holding Limited (BABA) – BUY
BUY the Alibaba Group Holding Limited (BABA) May 2022 $102-107 in-the-money vertical BEAR PUT spread at $3.95
Opening Trade
4-20-2022
expiration date: May 20, 2022
Portfolio weighting: 10%
Number of Contracts = 25 contracts
This is a tactical trade in Chinese internet platform Alibaba Group Holding Limited (BABA) that BABA will not rise above $102 in the next 30 days.
I don’t think the lockdowns are over in China and they are menacing to Baba's business model as Chinese consumers can’t earn a paycheck that goes into BABA products.
The 4.8% of Chinese growth is just a dog and pony show, under the hood, there are many economic problems there and BABA had a spike up to $120 in March and this is basically a bet that won’t happen in the next 30 days.
This stock is highly volatile, and the Nasdaq is going through fits and starts, anybody risk-adverse should take a seat on the sideline for now.
As for the BABA stock, I fully expect it to sink to $65 by the end of the year but there will be high volatility in between. It’s hard to believe that Berkshires Charlie Munger doubled down on this stock with his personal money that has resulted in massive losses for his family, but I have heard he has trimmed his position.
Here are the specific trades you need to execute this position:
Buy 25 May 2022 (BABA) $107 put at………….………$17.50
Sell short 25 May 2022 (BABA) $102 put at………….$13.55
Net Cost:…….............………………..…….………..…….....$3.95
Potential Profit: $5 - $3.95 = $1.05
(25 X 100 X $1.05) = $2,625 or 26.58% in 30 days
If you are uncertain on how to execute an options spread, please watch my training video by clicking here.
The best execution can be had by placing your bid for the entire spread in the middle market and waiting for the market to come to you. The difference between the bid and the offer on these deep in-the-money spread trades can be enormous.
Don’t execute the legs individually or you will end up losing much of your profit. Spread pricing can be very volatile on expiration months farther out.
Keep in mind that these are ballpark prices at best. After the alerts go out, prices can be all over the map.