We had introduced a pre-earnings options trade on Chinese e-retailer Alibaba on August 15, and we are now closing out that trade with a gain after the company today reported strong first-quarter results.
Alibaba reported first-quarter adjusted earnings per share of $1.17, above the market estimate of $0.94, and revenue of $7.4 billion, above the market’s expectation of $7.19 billion.
At the opening, the NYSE-listed shares are trading at $166, and the spread is priced at $7. This gives us a return on investment of 141%.
Those who want to stay in the trade a little longer could take some partial profits, for instance by liquidating half.
— Edited by John Acher
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