Posted on January 28, 2020
Reaching out today to all the good Jews who put on the BABA trade back on December 30th.
The letter was called BABA Got Whacked (how prescient of us!), and it urged you to sell the BABA January 31st 222.50 CALL for $3.55 and buy the BABA January 31st 227.50 CALL for $2.44. We then recommended you use those funds to purchase the BABA January 31st 195 PUT for the same $1.11. Zero premium was the result.
The long PUT now sells for $1.04, and the short spread is too far out-of-the-money to present a threat (it would have to close 12% higher by Friday).
So we’re suggesting you sell off the former and leave the latter to dry on the line.
If some earth-shattering news strikes over the next 48 hours we’ll update. Otherwise there’s very little to expect from the stock.
The truth is the Chinese are scared, and there’s little chance they’ll be rushing to spend their last discretionary Yuan online while the most deadly pandemic in a generation is swirling about them.
Take the $1.04 (on nothing spent!), and it appears your profit will be a whopping 593%!
We’ll offer final numbers next week.
The coronavirus may or may not be a game-changer over the intermediate and long term.
But right now, it’s the only story going.
G-d save us.
Alan B. Harvard