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CNBC Options Action's Dan Nathan spoke on the show about unusually high options activity in Alibaba Group Holding Ltd (NYSE: BABA) recently.

He noted that two times average daily options volume was traded, and the largest trade consisted of 10,000 contracts of the November collar.

A trader sold the November 22, 110 strike call options for $1.40 and bought the November 7 weekly, 94 strike put options for $2.40, paying net $1 for this trading structure, he added. 

Against a long stock position, this trade allows the trader to participate on the upside up to $109 and the long position is protected below $94 ahead of the first earnings report for the publicly-traded company.

It reports on November 4.

In particular, Nathan emphasized that implied volatility for Alibaba's options has increased ahead of the important event.

Posted-In: Dan Nathan Options ActionCNBC Media


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