Originally Posted by
JamesBond
If if if.... Yeah, if BABA hits $400. It could also hit $150. That does not change the fact that you are starting $6100 down, and tying it up for 18 months. The only good there is that that is your maximum loss. But again that is a $6100 hole that you must first dig out of before you make penny 1 in profit. Out of curiosity, how long do you think it will take for the option to recover that? I guess perhaps I prefer to be more liquid in this environment. When money starts to get expensive again,(2022 or 2023?) I think the bull run will become at best more of a bull walk. Different discussion however for another thread perhaps.
And I have to say that using GME as ANY kind of litmus test... well.... lulz.... If that is the windmill you are tilting at I wish you all the luck in the world. But I will reiterate that you are in love with a company... a Chinese company at that, and imho, that is not a wise idea no matter what your interpretation of their fundamentals is. I would wager that the next Republican president is going to see that Mr Trump was right in his economic attack on them and start it back up again. Remember, they need us, we don't need them.
So let me ax you this then... being that you are confident that BABA is going up, why don't you sell some puts against that call to recoup some of your premium? The Jan 23 $180 puts go for about $21... so the money you are ponying up is only $40. In every post that you have mentioned BABA, you have exuded extreme confidence that it is going up. No doubt. So why pay more for something that is going up anyway? For that matter, sell the $255 OTM puts and your cost is (essentially) zero. You might even collect some premium. Now you have ponied up nothing and when the stock goes up, your call becomes more valuable and the put declines to zero and you win bigly. I get the impression that you would not want to do that because your confidence in the stock really isn't what you say it is. If it is, this kind of trade is a no brainer.
Like I alluded to earlier, this kind of spread/condor/whatever stuff is too Mickey Mouse for me and I prefer to just go for the throat and sell the put outright and do something else with the premium collected.
Oh, and I would have sold the 9000 Delta pilot puts every week.
Not intended as investment advice, dyodd, ymmv, past performance, yada yada yada
Yes it could theoretically hit $150. But by buying at a large discount to Intrinsic Value(30%+) initially you protect your downside. I call it my margin of safety. Moreover, buying at least 20% ITM, the stock does not have to move much to breakeven. My $6100 premium leverages me to control $21,200 worth of options. The stock only needs to move 8-9% to breakeven at a $170 strike price. If I'm buying an option on a stock that 30%+ undervalued, growing earning at 30%+ a year and have a 1 yr+ time Horizon on the expiration date I say that's sheer outrageous value with a large margin of interest.
Buy writing Puts I'm taking equity downside risk and not getting paid nearly enough to do it.
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