New Alibaba Options Trading Offers Investment Opportunities

Investors of Alibaba Group Holding Ltd (Symbol: BABA) can now engage with new options that began trading today, set to expire on December 13th. Stock Options Channel has utilized its YieldBoost formula to pinpoint interesting options among the new contracts.

Put Option Insights

One notable put contract is at a $93.00 strike price, currently carrying a bid of $2.89. By choosing to sell-to-open this put, an investor agrees to buy the stock at $93.00 but also gains a premium, reducing the effective cost basis to $90.11 (before broker fees). This option may appeal to those already looking to buy shares of BABA, as it offers a more affordable route than today’s market price of $97.15 per share.

The $93.00 strike is about a 4% discount from the current stock price, indicating that it is out-of-the-money. There is a 65% chance that this put will expire worthless, according to current analytical data (including greeks and implied greeks). Stock Options Channel will monitor these odds and share updates on their website. If the contract expires without value, investors could see a 3.11% return on their cash commitment, translating to an annualized yield of 26.35% — a metric we refer to as YieldBoost.

Below, a chart illustrates Alibaba’s trailing twelve-month trading history, with the $93.00 strike marked in green:

Analyzing Call Options

On the call options side, there is a contract with a $107.00 strike price, which has a current bid of $2.61. If an investor buys BABA shares at the current price of $97.15 per share and then sells-to-open this call contract, they commit to sell the stock at $107.00. This strategy could yield a total return of 12.83%, provided the stock is called away by the December expiration (excluding any dividends and broker fees). However, should BABA’s shares rise significantly, this strategy could limit potential gains, emphasizing the importance of reviewing recent trading history and the company’s fundamentals.

The chart below displays BABA’s twelve-month trading history, with the $107.00 strike noted in red:

Notably, the $107.00 strike price is approximately a 10% increase over the current market price, marking it as out-of-the-money. There is a 69% chance that this covered call contract could expire worthless, enabling the investor to keep both their shares and the premium received. Stock Options Channel will track these probabilities over time for further insights on their website. If the contract expires worthless, the premium would add a 2.69% return boost for the investor, which equates to an annualized 22.78% — again, dubbed YieldBoost.

The implied volatility for the put contract stands at 42%, while the call contract reflects a 48% implied volatility. In contrast, we calculate the actual trailing twelve-month volatility—based on the past 251 trading days and the current price of $97.15—to be 37%. For further options ideas, visit StockOptionsChannel.com.

Explore Top YieldBoost Calls of the S&P 500 »

Also see:

• JAZZ Options Chain
• PATK Stock Predictions
• DIS Insider Buying

The views and opinions expressed herein are solely those of the author and do not necessarily represent those of Nasdaq, Inc.