http://www.options-trading-education.com/24102/alibaba-stock-options/
Alibaba Stock Options
Alibaba stock options are somewhat pricey because of the high volatility of the stock. The stock opened its IPO at $94 and has traded downward to $88 a share. For October 10 there are currently more calls than puts in Alibaba stock options trading as it appears that many investors who could not get in at the beginning are looking for a decent price at which to get the stock. The price of Alibaba stock options is somewhat high because of current expected volatility. Our belief is that the cost of options on Alibaba will fall as traders become more familiar with the stock. Our interest in Alibaba stock options is in the longer term. That is where we believe there will be problems with the stock. In picking options to trade it is important to analyze both fundamentals and market sentiment. The former is a problem with Chinese stocks as these companies often lack transparency.
Alibaba Stock Options over the Long Run
The excitement running up to the Alibaba IPO is over. This is a company in which the majority of shareholders have no say in how the company is run. We think this is a great deal for the insiders who have made a lot of money. This is a bad deal for anyone who invested their money in BABA with an eye to future earnings and retirement. Our belief is that investors will wake up to the fact that Alibaba is a bad deal for non-insiders. Then the issue will be making money by buying puts on Alibaba. Alibaba is only part of a network of Chinese internet companies. The other related companies are wholly owned by Jack Ma, the founder of Alibaba and his inner circle. It will be incredibly easy to siphon profits out of Alibaba and into the other private companies. When BABA quarterly reports start showing problems there will be substantial downward pressure on the stock. The general consensus is that BABA is selling for twice what it is worth compared to other Chinese internet service companies. If the insiders start pulling profits out of BABA and into their pockets the company will be worth a lot less. Our belief is that eventually those who buy puts in Alibaba stock options will be winners.
And What if Alibaba Does Well?
Not all contrarian opinions turn out to be correct. What if Alibaba prospers and makes its investors rich? Here is why traders use options instead of buying or selling stocks outright. Trade options and limit your risk. And, in the event of eventual volatility of Alibaba as long straddle might be a good choice. In this case a trade purchases both a call and a put on the same stock with the same expiration date. He makes money if the stock rises or if it falls. His risk is limited to the price of the two options contracts. As always do your own homework and remember that no one ever lost money sitting out of a trade that they did not understand.
2. Alibaba stock options are
somewhat pricey because of the
high volatility of the stock.
3. The stock opened its IPO at $94
and has traded downward to $88
a share.
4. Before We Continue…
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5. For October 10 there are currently
more calls than puts in Alibaba
stock options trading as it appears
that many investors who could not
get in at the beginning are looking
for a decent price at which to get
the stock.
6. The price of Alibaba stock options
is somewhat high because of
current expected volatility.
7. Our belief is that the cost of
options on Alibaba will fall as
traders become more familiar with
the stock.
8. Our interest in Alibaba stock
options is in the longer term. That
is where we believe there will be
problems with the stock.
9. In picking options to trade it is
important to analyze both
fundamentals and market
sentiment.
10. The former is a problem with
Chinese stocks as these
companies often lack
transparency.
12. The excitement running up to the
Alibaba IPO is over. This is a
company in which the majority of
shareholders have no say in how
the company is run.
13. We think this is a great deal for
the insiders who have made a lot
of money.
14. This is a bad deal for anyone who
invested their money in BABA with
an eye to future earnings and
retirement.
15. Our belief is that investors will
wake up to the fact that Alibaba is
a bad deal for non-insiders.
16. Then the issue will be making
money by buying puts on Alibaba.
Alibaba is only part of a network
of Chinese internet companies.
17. The other related companies are
wholly owned by Jack Ma, the
founder of Alibaba and his inner
circle.
18. It will be incredibly easy to siphon
profits out of Alibaba and into the
other private companies.
19. When BABA quarterly reports start
showing problems there will be
substantial downward pressure on
the stock.
20. The general consensus is that
BABA is selling for twice what it is
worth compared to other Chinese
internet service companies.
21. If the insiders start pulling profits
out of BABA and into their pockets
the company will be worth a lot
less.
22. Our belief is that eventually those
who buy puts in Alibaba stock
options will be winners.
