Mike Khouw said on CNBC’s “Options Action” that a pullback in Alibaba Group Holding Ltd – ADR (NYSE: BABA) presents an opportunity for people who had not gotten into a long position to do so. He thinks that Alibaba’s financial results are still very good and recent issues might ultimately get sorted out.
To make a bullish bet, Khouw wants to buy the February $270 call for $19 and sell the December $285 call for $4. The total cost for the trade is $15 and it should benefit from the decay of the December $285 call over time, explained Khouw. If the December call is worthless at expiration, Khouw is going to have exposure to Alibaba through the February call, with a break-even at $285.
Carter Worth sees strong support for Alibaba at the 150-day moving average. He is a buyer of the stock.
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