Over the last two weeks, I’ve recommended taking gains of up to 106% and 130% on the BABA January 90 call, as well as gains of up to 74% and 65% gains on the BABA April 105 calls. I even recommended a buy on the BABA July 135 calls, which now remain on hold.
Now, though, as we head into earnings, every one believes the company will beat, and that the stock will rally significantly higher. In doing so, they’re crowding the bullish side of the trade.
They’re ignoring the “what if” here.
If BABA fails to beat, it could plunge – near-term – and pull back from oversold technical pivot points. So, instead of just holding the BABA April 2015 calls, it may be safest to also hedge with a put option for the “what if.”
This is Wall Street. Nothing is set in stone. And I have to consider all scenarios.
While holding the BABA April calls, consider buying to open the BABA January 2015 97.50 put up to $6.00.