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) – SELL – TAKE PROFITS
SELL the Alibaba Group Holding Limited (BABA) May 2022 $102-107 in-the-money vertical BEAR PUT spread at $4.85
Closing Trade
4-26-2022
expiration date: May 20, 2022
Portfolio weighting: 10%
Number of Contracts = 25 contracts
This was a tactical trade in Chinese internet platform Alibaba Group Holding Limited (BABA).
I bet that BABA would not rise above $102 in 30 days and since I executed this short position, the underlying stock BABA has dropped $8 nominally or about 9%.
Take profits here, I am accruing over 90% of the maximum possible profit, more aggressive traders could hold it until expiration and will take maximum profits if the stock doesn’t rise more than 19% before expiration day.
It's so bad in China right now that the Chinese government has ordered prominent traders to support Chinese stocks and has promised tech companies to stock cracking down on them.
The problem with this artificial propping up is that once it's over, another massive drawdown will ensue because there is no dip buyer.
The velocity with which the selloff has happened in Chinese tech is an omen for the broader economy.
Chinese nationals preside over a system where they receive no social support meaning no unemployment benefits when they are locked down.
If they don’t work and get paid, they can’t buy stuff on BABA.
These Chinese stocks would be down a lot more if it wasn’t for the Chinese Communist Party intervening and it shows on my screen with abnormal price action in my other two short positions in PDD and JD.
It’s quite obvious that there is a helping hand on the long side, but will they have deep enough pockets to endure this Nasdaq meltdown?
In the meantime, we take profits on BABA. Here are the specific trades you need to exit this position:
Sell to Close 25 May 2022 (BABA) $107 puts at………….………$24.35
Buy to Close 25 May 2022 (BABA) $102 puts at…….........…….$19.50
Net Proceeds:……………………..…….………..…….....$4.85
Profit: $4.85 - $3.95 = $.90
(25 X 100 X $.90) = $2,250 or 26.78%
To see how to enter this trade in your online platform, please look at the order ticket below, which I pulled off of Interactive Brokers.
If you are uncertain on how to execute an options spread, please watch my training video on “How to Execute a Vertical Bull Call Spread” by clicking here at
http://www.madhedgefundtrader.com/ltt-vbpds/
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.
