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The BABA Trade

Byadmin

To recap a trade that I put on:

  • Bought shares of BABA at $86.66 per share
  • Sold Nov 17 2023 CALL options with a $70 strike for $17.75 per share

The total cost to put on this trade was $86.66 – $17.75 = $68.91 per share.

I intended to “roll” this trade to the next 0.95 delta strike with 15 days to expiry for a $1 profit. It’s currently 39 days to expiry.

As I type this, BABA is trading for $84.86, and the call is trading for $13.88, so I could close out this trade for $70.98 which is a $2 profit so far. So I’ve met my profit goal early. So what do you do if you meet your profit goal early?

The Nov 17 2023 CALL is still showing at 0.95 delta, so there’s not a “rolling” opportunity yet in the same month.

I could potentially roll to Dec 15 2023 CALL at $65 strike (0.96 delta) for a $20.95 credit. That could potentially lower my cost by $7 per share in exchange for 1 more month trade. But that increases my potential losses by $5 if the call gets exercised. Or if I stick to the $70 strike (0.92 delta), I could collect a $16.50 credit.

I really need to develop a strategy for rolling deep-in-the-money calls. Guessing sucks.

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