This week we are looking at another of the Investor’s Business Daily (IBD) Top 50 List companies. We use this list in one of our portfolios to spot outperforming stocks and place spreads that take advantage of the momentum. By the way, while last week was the worst week for the market in several years, our most popular portfolio managed to gain 55% for the week after its underlying (Facebook) announced earnings.
Is Alibaba’s (BABA) Post-Earnings Dip a Buying Opportunity?
Several analysts believe there is further upside ahead for Alibaba, here are two of them – Alibaba PT Raised to $218 at Deutsche Bank and Alibaba PT Raised to $250 at Morgan Stanley.
Alibaba stock fell under pressure following last week’s earnings release and is seen trading near the halfway point measured from last month’s low to a high posted at the end of January. Strong support is seen near the psychological $180 price point as it confluences with the lower line of a rising trend channel as well as the 61.8% Fibonacci retracement of the leg higher from early December.
BABA Chart January 2018
If you agree there’s further upside ahead for Alibaba, consider this trade which is a bet that the stock will continue to advance over the next five weeks, or at least not decline very much.
Buy To Open BABA 9Mar18 177.50 Puts (BABA180309P177.5)
Sell To Open BABA 9Mar18 180.00 Puts (BABA180309P180) for a credit of $0.85 (selling a vertical)
This price was $0.02 less than the mid-point of the option spread when BABA was trading near $187. Unless the stock rallies quickly from here, you should be able to get close to this amount.
If you use our favorite broker for this trade, tastyworks, your commission on this trade will only be $1 per opening contract ($2 per spread) (and there is no commission on closing trades, only the $.10 clearing fee). Each contract would then yield $83 and your broker would charge a $250 maintenance fee, making your investment $167 ($250 – $83). If BABA closes at any price above $180.00 on March 9, both options would expire worthless, and your return on the spread would be 50% (567% annualized).
Changes to Investor’s Business Daily (IBD) Top 50 This Week:
IBD Underlying Updates February 1, 2018
We have found that the Investor’s Business Daily Top 50 List has been a reliable source of stocks that are likely to move higher in the short run. Recent additions to the list might be particularly good choices for this strategy, and deletions might be good indicators for exiting a position that you might already have on that stock.
As with all investments, you should only make option trades with money that you can truly afford to lose.
Click Here For Original Source Of The Article
A Turing Award-winning computer scientist and statistician shows how understanding causality has revolutionized science and will revolutionize artificial intelligence
"Correlation is not cau... read more
Pride, greed, and power have driven men to do the unthinkable–including selling out their nations and unsuspected citizens to the most corrupt and destructive “invisible” global leaders on Earth. But how did this happen on American soil? How ... read more
Twenty benefits from the three-fund total market index portfolio.
The Bogleheads' Guide to the Three-Fund Portfolio describes the most popular portfolio on the Bogleheads forum. This all-indexed portfolio contains more than 15,000 worldwide... read more
Real estate investment is nothing new, but attaining financial freedom through property without ever having to deal with the headaches of renters, renovations, or rodents isn’t something you hear about every day. Yet with Mark Podolsky’s trie... read more
If you will live like no one else, later you can live like no one else. Build up your money muscles with America's favorite finance coach. Okay, folks, do you want to turn those fat and flabby expenses into a well-toned budget? Do you want to... read more
"An intelligent explanation of the mechanisms that produced the crisis and the response to it...One of the great strengths of Tooze's book is to demonstrate the deeply intertwined nature of the European and American financial systems."--The N... read more
This #1 New York Times best-selling guide to decluttering your home from Japanese cleaning consultant Marie Kondo takes readers step-by-step through her revolutionary KonMari Method for simplifying, organizing, and storing.Despite constant ef... read more
Kevin Horsley Broke a World Memory Record in 2013...And You're About to Learn How to Use His Memory Strategies to Learn Faster, Be More Productive and Achieve More SuccessWith over 100,000 copies sold, Unlimited Memory is a Wall Street Journa... read more
#1 New York Times Bestseller“Significant...The book is both instructive and surprisingly moving.” —The New York TimesRay Dalio, one of the world’s most successful investors and entrepreneurs, shares the unconventional principles that he’s dev... read more
#1 Amazon Best Seller! ─ Infographics EditionWhat are the habits of successful people? The 7 Habits of Highly Effective People has captivated readers for 25 years. It has transformed the lives of Presidents and CEOs, educators, parents, and s... read more