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Dan Nathan's Alibaba Group Trade Ahead Of Earnings


Speaking on CNBC's Options Action, Dan Nathan shared with the viewers a tactical options strategy in Alibaba Group Holding Ltd (NYSE: BABA).

This strategy is for the traders who believe that the company is going to beat the estimates on November 4, but haven't participated in the rally so far.

Nathan recommended on the show a purchase of a call butterfly for $2. He said that he wants to buy the November 100 call for $4.20, sell two November 110 calls for a total of $2.50 and buy the November 120 call for $0.30.

The trade is going to be profitable if the stock trades between $112 and $118 at the November expiration, but the maximal profit would be achieved at $110. Above $110, the profit will start to fade and the premium paid is the maximal loss.


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