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
The full inside story of the breathtaking rise and shocking collapse of Theranos, the multibillion-dollar biotech startup, by the prize-winning journalist who first broke the story and pursued it to the end, despite pressure from its charisma... read more
How the study of causality revolutionized science and the world
"Correlation does not imply causation". This mantra has been invoked by scientists for decades and has led to a virtual prohibition on causal talk. But today, that taboo is dead... read more
Many people work hard all their lives scrimping and saving in order to achieve the American dream of financial freedom. The unfortunate reality, however, is that success is fleeting, and debt, loss, and corruption are all too common. Whether ... read more
The inside story of the clash of two of Wall Street's biggest, richest, toughest, most aggressive players--Carl Icahn and Bill Ackman--and Herbalife, the company caught in the middle
With their billions of ... read more
In this essential handbook - a blend of Rich Dad, Poor Dad and The Happiness Project - the cohost of the wildly popular InvestED podcast shares her yearlong journey learning to invest, as taught to her by her father, investor and best-selling... read more
Deciding to become a real estate investor might be the smartest financial decision you’ll ever make. The next step is to make sure you do it right. Chris McLaughlin is a seasoned and successful real estate investor whose offices collectively ... read more
Jim's FOREX books are consistently ranked BEST SELLERS on Amazon and there is a very good reason for this. At no extra cost (or on-costs) Jim shares with his readers:
His custom indicators for... read more
A Turing Prize-winning computer scientist and statistician shows how understanding causality has revolutionized science and will revolutionize artificial intelligence
"Correlation is not cau... read more
New York Times Bestseller “I want to rip out every page of this glorious book and hang them on my wall so that I can be surrounded by these incredible women all day long.” —Emma Straub, New York Times bestselling author of The Vacatio... read more
Antifragile is a standalone book in Nassim Nicholas Taleb’s landmark Incerto series, an investigation of opacity, luck, uncertainty, probability, human error, risk, and decision-making in a world we don’t understand. The other books in the se... read more