This BABA Bull Put Spread has Defined Risk and 89% ROI Potential


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This BABA Credit Put Spread Aims for 89% ROI in 6 Days

Bullish play with a target stock price of $87 or above

Strategy has +89% upside potential and 10% overvalued


Expiration24-May-24
Buy85 Put
Sell87 Put
Credit:$0.94


Alibaba Gr Holding has seen its price gain +7.4% today to $86.95. The above option strategy is a bullish play that shows a theoretical 60% win rate, based on BABA's historical stock price behavior.

Option Profit Calculator for BABA Put Spread at 24-May-24 Expiration

If BABA stock price at expiration is at or above $87.00, this spread has a 89% upside potential

The optimal stock price for this option strategy is to close at or above $87.00 on the expiration date, May 24, 2024. In that scenario, both puts would expire worthless, allowing you to keep the entire $0.94 you received when selling the spread. That corresponds to a potential +89% return on the amount at risk with 6 days left until expiration.

The maximum gain will be realized if the stock price is at or above 87.00. The maximum gain is $0.94

The breakeven point is at 86.06, which is 1.0% below the current spot price.

The maximum loss will occur when the stock price is at or below 85. The max loss is $1.06.

BABA Spread Current Market Price vs. Historical Average

BABA Put Spread is trading at a 10% premium to historical average.

Using historical data to measure how a similar spread in BABA was priced in the market, the 4-year average value was 0.85, with a high mark of 0.95 and a low of 0.70.

Currently, this vertical put spread is bid at 0.94 and offered at 1.06. The midpoint of the spread is 1.00.

If we use 0.85 as our historical fair value benchmark, the current market bid price is at a 10% premium, while the current market midpoint represents a 18% premium.

Current PriceHistorical Values of Similar Spreads
BidAskMidpointAverageHighLow
0.941.061.000.850.950.70
Market Chameleon captures daily records of market data to calculate historical benchmarks and generate estimated values.

Takeaway

The BABA put spread we've identified here can be a good way to play a bullish outlook because the option strategy has a +89% upside potential, is 10% overpriced relative to historical measures, and will benefit from a stock price at or above $87.

See how Market Chameleon can help you make smarter and more efficient trades!


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About the Publisher - Marketchameleon.com:


Marketchameleon is a comprehensive financial research and analysis website specializing in stock and options markets. We leverage extensive data, models, and analytics to provide valuable insights into these markets. Our primary goal is to assist traders in identifying potential market developments and assessing potential risks and rewards.



NOTE: Stock and option trading involves risk that may not be suitable for all investors. Examples contained within this report are simulated And may have limitations. Average returns and occurrences are calculated from snapshots of market mid-point prices And were Not actually executed, so they do not reflect actual trades, fees, or execution costs. This report is for informational purposes only, and is not intended to be a recommendation to buy or sell any security. Neither Market Chameleon nor any other party makes warranties regarding results from its usage. Past performance does not guarantee future results. Please consult a financial advisor before executing any trades. You can read more about option risks and characteristics at theocc.com.


The information is provided for informational purposes only and should not be construed as investment advice. All stock price information is provided and transmitted as received from independent third-party data sources. The Information should only be used as a starting point for doing additional independent research in order to allow you to form your own opinion regarding investments and trading strategies. The Company does not guarantee the accuracy, completeness or timeliness of the Information.