Alibaba Stock Analysis: How To Trade BABA Stock From Here (Triple Income Wheel)

Alibaba Group (BABA) stock is down 31% this year as fear of further Chinese regulation has crushed the shares.

However, if any Chinese company deserves a look during this regulatory uncertainty...it's certainly the "Amazon of China". Alibaba is the second largest Chinese stock (by market cap) and is looking very attractive at current levels.

The stock has had a nice bounce off of the $140 level over the past few days and it feels like the bottom could finally be in!

All that said, it's unlikely that the stock will move in a straight line higher from here and it would not be surprising if BABA retested the recent lows in the short term.

So how can we structure a trade to take advantage of the upside potential in the stock while also protecting some of the near-term downside?

It's a perfect situation for a "Triple Play" trade!

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Great Facebook Groups Discussing the Wheel:
Options Wheel Strategy: https://www.facebook.com/groups/311628760154001
Triple Income Wheel: https://www.facebook.com/groups/tripleincomewheel
Cash Secured Puts: https://www.facebook.com/groups/cashsecuredputs

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Alibaba is the world's largest online and mobile commerce company, measured by GMV (CNY 6.6 trillion/USD 1 trillion for the fiscal year ended March 2020). It operates China's most-visited online marketplaces, including Taobao (consumer-to-consumer) and Tmall (business-to-consumer). Alibaba's China commerce retail division accounted for 69% of revenue in the December 2020 quarter, with Taobao generating revenue through advertising and other merchant data services and Tmall deriving revenue from commission fees. Additional revenue sources include China commerce wholesales (2%), international retail/wholesale marketplaces (5%/2%), cloud computing (7%), digital media and entertainment platforms (4%), Cainiao logistics services (5%), and innovation initiatives/other (2%). (Source: YCharts)
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A "Triple Play" trade involves simultaneously selling a cash-secured put and a covered call on a stock that you own.

Note that if you don't currently own BABA stock, you will want to buy it before you write the covered call.

BABA Price at publication = $160.90

Cash-Secured Put Trade:
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BABA Nov 19th $140.00 Put
Option Premium: ~$4.00 premium
Average Monthly Yield %: 2.1% (25.2% annualized)
Margin-of-Safety %: 13.0%
Delta: 21

Covered Call Trade:
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BABA Nov 19th $180.00 Call
Option Premium: ~$3.65 premium
Average Monthly Yield %: 1.6% (19.2% annualized)
Upside Profit %: 14.1%
Delta: 26


DISCLAIMER--------------------------------------------------------------------------------------------------------------------------------------
Parsimony Investment Research and/or it's affiliates may or may not have a position in the stocks and/or options mentioned in this video at the time of publication. The information contained within this video is for informational and educational purposes only and it is not intended as a recommendation of the securities highlighted or any particular investment strategy; nor should it be considered a solicitation to buy or sell any security. The strategies and securities mentioned in this video may not be suitable for all types of investors and the information contained in this report does not constitute advice. Past performance is not a guarantee of future results. Options involve risk and are not suitable for all investors. Prior to buying or selling an option, a person must receive a copy of Characteristics and Risks of Standardized Options. Copies of this document may be obtained from your broker.