MKM Partners Recommends Options Trade to Get Long Alibaba

Alibaba Group Holding Ltd BABA has a lockup of 337 million shares expiring today, with another 100 million shares coming up when Q1 earnings are announced in mid-May. Through this time, Rob Sanderson at MKM Partners is looking to buy Alibaba on any weakness.

Sanderson says that last quarter's earnings, which prompted the stock to slide 19 percent this year, are not "consequential over the long term." Instead, he expects Alibaba's monetization to improve, leading the stock to gain to $125 in the next year.

Sanderson also says that options positioning will allow traders to sell risk reversals and add to long exposure. Specifically, the analyst recommends selling $75 puts and using that to offset a purchase of a $92.50 calls. The net debit of $0.89 puts a break-even at $93.39.