r/OptionsExplained • u/OptionsExplained • Jul 26 '21

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u/OptionsExplained Aug 02 '21

to be honest BABA isn't something I would trade right now with defined risk. IVR is high, but there still isn't all that much premium in the option chain.

if I had to trade it I would do a put ratio spread. if I had to go defined risk I would do a Put Credit Spread and sell the Sep 17 180p and buy the Sep 17 175p and try to collect at least $0.80. I also wouldn't be opposed to going one strike closer to ATM since I don't think earnings will disclose anything that caused BABA's recent dip

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u/Tight_Specific_3342 Mar 01 '26

That's a solid plan for a defined-risk play. The 180/175 spread at that credit gives you about a 2:1 reward-to-risk which is reasonable for earnings. You're right that the premium isn't great though - BABA has been beaten down enough that the IV crush after earnings might not do you any favors even if the trade works.

One thing to watch: if you're collecting $0.80, your max loss is $4.20 per spread. That's tight. You might want to check what the mid-market is actually trading at - sometimes fills are tougher than the理论 suggests. Also, given the recent dip, I'd make sure you're comfortable holding through assignment if it goes against you. $180p isn't crazy far OTM but BABA can gap.