Covered Call Trade Initiated With Alibaba (BABA) Shares

by | Mar 11, 2021 | Covered Calls

Alibaba LogoAs per my previous post, I expect my Merck shares to be called away tomorrow so I ran my screens this afternoon to look for another stock to buy shares of and then sell covered calls on. My selection was Alibaba for which I paid $240.32 per share and then sold slightly OTM Apr-16 $245 calls at $9.05 each.

As per the analysis below, if my BABA shares are called away on the option expiry date of April 16, the trade will generate an annualized return of 59.2%. If the shares are trading at $240 on April 16 then the trade will generate an annualized return of 38.7%. Of course, as with all my covered call trades, a profit is not guaranteed as the stock price could fall below my breakeven price.

Covered Call Trade Return Table

By now you may have noticed that many of the stocks that I choose to sell covered calls on have exhibited a recent downward price trend. BABA fits that bill.

BABA Chart

All the best in trading and in life.