New day, new series. I am excited to introduce the YOLO (You Only Live Once) Adventures. This is going to be an experiment where I bet $1,000 in options to try and get outsized returns in a short period of time. Of course, I will be using techniques that I have previously mentioned to try and optimize risk/return. On the chopping block, this week is BABA
The main reason for buying this stock is essentially the Chinese Amazon. It is a huge marketplace to buy extremely cheap products. Recently the price has fallen as there has been a crackdown by Chinese regulators which has caused investors to flee the name to reduce political risk. However, things may be about to change.
Technically, the stock has seen roughly a 40% reduction. This has caused the stock to overextend its 200-day moving average, creating the potential for a reversal. Additionally, it has bounced twice near the $200 level which could serve as a technical and psychological support level. Furthermore, the stock is approaching a Bullish Wedge Pattern. Any break above the downward trend will serve as a huge catalyst.
In some of my options research, the ratio of call to puts is 5-1, a very bullish signal. From TD Ameritrade’s ThinkorSwim platform I derived that there were over 150,000 calls and roughly 30,000 puts on July 21. This suggests that many entities are betting on an increase in price. Today alone there was roughly 18B in call options.
Finally, the company reports its earnings on August 3, 2021. I will use this as an exit opportunity as implied volatility usually increases around earnings periods. I will begin entering this trade on the trading week ending July 23. I will average down if the stock continues to sell off and add more around the $200 level.
Zoom out to the 5 year chart and you will see the price is about to hit the lower support level of the channel established since 2016
The only variable is the Chinese delisting
howdydany
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@thomasdmd, Yes as stated, regulation by the Chinese gvt is a huge risk. I do not think that delisting will come to fruition. Tapping public markets is beneficial for both parties.
macklflowers24
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I am a new trader learning I have 210$ calls expiring this week. love the play and info
howdydany
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@macklflowers24, Currently getting merked but I knew the risks coming into this play. Averaging down is a serious contemplation.
The only variable is the Chinese delisting