Trade Alert - (BABA) December 18, 2020 - TAKE PROFITS-EXPIRATION

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.

 

Trade Alert - (BABA) – EXPIRATION-TAKE PROFITS

EXPIRATION of the Alibaba (BABA) December 2020 $220-$240 in-the-money vertical Bull Call spread at $20.00

Closing Trade

12-18-2020

expiration date: December 18, 2020

Portfolio weighting: 10%

Number of Contracts = 6 contracts

 

This options call spread does not expire until the end of today.

However, I have a record eight positions going into today's options spread expiration so I am going to start closing these out early so as not to overload you, or my back office.

Provided that (BABA) does not fall by more than $24.43 by the end of today, the Alibaba (BABA) December 2020 $220-$240 in-the-money vertical Bull Call spread will expire at $20.00.

You get to take home $1,440, or 13.63% in 19 trading days. Well done, and on to the next trade.

You don’t have to do anything with this expiration.

Your broker (are they still called that?) will automatically use your long position to cover your short position, canceling out the total holdings.

The entire profit will be credited to your account on Monday morning December 21 and the margin freed up.

Some firms charge you a modest $10 or $15 fee for performing this service.

Over the past few months, record amounts of money have been pouring into China and emerging market ETFs. The reasons are very simple.

First into the pandemic, China was first out. With the most draconian lockdown yet seen, the Middle Kingdom was able to cap total deaths at 4,000. The US is now losing that number of people every two days….with one-fourth the population! As a result, China now has the world’s strongest economy, growing at a 6.6% annual rate.

The incoming Biden administration will lead to a major improvement in trade relations, bringing us back to globalization. All of this is hugely positive for Alibaba (BABA).

Alibaba is the giant of Chinese online commerce. Think of it as a combination of Amazon, Google, and PayPal. Its stock recently took a big $70, or 22% hit from the cancelation of the Chinese fintech giant Ant Group IPO, expected to be the largest in history at $37 billion.

As a 33% owner of the Ant Group, Alibaba was to receive a major payout from this. Eventually, the Ant IPO will go through somewhere, if not in China then in Hong Kong, or even the US next year. This will be hugely positive for Alibaba stock.

This was a bet that Alibaba (BABA) would not trade below $240 by the December 18 option expiration day in 19 trading days.

Here is the specific accounting you need to close out this position:

EXPIRATION of 6 December (BABA) $220 calls at………...….………$44.43

EXPIRATION of short 6 December (BABA) $240 calls at…………...$24.43

Net Proceeds:……………………..…….….................……..………….….....$20.00

Profit: $20.00 - $17.60 = $2.40

(6 X 100 X $2.40) = $1,440, or 13.63% in 19 trading days.