Collect Cash Waiting To Buy China's Biggest Retailer

2023年9月5日

Hey guys! Today, we're looking at a Trade Idea in Alibaba, the infamous Chinese Tech company / Retailer.

Like most of our trade ideas, this post focuses on selling put options - this time, on BABA shares.

In case you're unfamiliar with options -> when you sell a put option, one of two things happens.

Either;

A.) The stock price finishes above the strike price of the put when the put expires, in which case you make money.

B.) The stock price finishes below the strike price of the put when the put expires, in which case you’re forced to buy the stock at the strike price.

With the trades we publish, if the stock goes up, sideways, or down a bit, you'll make money. If the stock goes down a lot, then you'll be forced to buy shares.

In other words - either make money, or buy the dip!

The trick is finding the right stock at the right time.

Right now, BABA seems like a great candidate for this strategy.

First, the company's recent share price decline seems to have flattened out considerably, which means that the market has priced the majority of the risk associated with Chinese exposure at the moment:



Secondly, the company's valuation has come in significantly, and management is buying back diluted share count, which could lead to higher EPS and an increasing stock price in the future.



Finally, the $85 level in the stock is a local support level which was recently put in earlier this year, which should add confluence to the trade idea, if shares end up getting assigned:



Net net, this idea has an 81% chance of earning max profit by expiry, which, combined with the positive price action, solid fundamentals, and recent support level, make us feel comfortable taking risk here.

What do you think?


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