Trade Alert - (BABA) November 14, 2014
As a potentially profitable opportunity presents itself, John will send you an alert with specific trade information as to what should be bought, when to buy it, and at what price. This is your chance to ?look over? John Thomas? shoulder as he gives you unparalleled insight on major world financial trends BEFORE they happen.
Trade Alert - (BABA)
Buy the Alibaba (BABA) December, 2014 $100-$105 in-the-money vertical call spread at $4.25 or best
Opening Trade
11-14-2014
expiration date: December 19, 2014
Portfolio weighting: 10%
Number of Contracts = 25 contracts
You can buy this vertical call spread anywhere within $4.25-$4.50 range and have a reasonable expectation of making money on this trade.
If you don't do spreads - start scaling in small amounts of the stock at market price.
After one of the most prolific stock market recoveries in history, I am not inclined to load the boat here with risk. This spread is a generous $9, or 8.6% in the money. We also have half of our model trading portfolio expiring at its maximum profit point at the November expiration a week.
I believe that we will see one of the greatest performance chases of all time, as under-performing managers struggle to play catch up going into the December book closing.
The big focus will be on market leaders, like Apple (AAPL), Microsoft (MSFT), Tesla (TSLA), and Alibaba (BABA). The more of these stocks that show up in the annual report, the smarter managers look to their investors. Expect buying to focus on a limited number of winners.
Alibaba has the particular attraction in that the stock is still cheap relative to its torrid growth rate. The stock has just had a $6, 5% pullback from its all time high yesterday, and seems headed to $140 at the least.
Remember too, that China is benefiting much more than the US from the collapse of oil prices, as it is much more dependent on high cost imports than we are.
Keep in mind that the options market is highly illiquid now, so don't hold me to these prices. They are ballpark estimates, at best.
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.
If the price of this spread has moved more than 10% by the time you receive this Trade Alert, don't chase it. Wait for the next one. There are plenty of fish in the sea.
Here are the specific trades you need to execute this position:
Buy 25 December, 2014 (BABA) $100 calls at...............$14.40
Sell short 25 December, 2014 (BABA) $105 calls at.........$10.15
Net Cost:...........................................................$4.25
Potential Profit: $5.00 - $4.25 = $0.75
(25 X 100 X $0.75) = $1,875 or 1.88% profit for the notional $100,000 portfolio.
