On 24 Dec, BABA had black Swan News effect. With antitrust probe news, BABA stock price falls 13%
Such news effect to the single stock, it is like Black Swan event. That is reminder for all traders to have small allocation for single stock.
Even with black swan event like this, BABA price level falls at 120% oversold level. I have a position,
Sell Put @ 245 Expire on 8 Jan. the original premium received was $4.00.
After news and market selling off, the same put price was up to $31.00. Some of traders in my trading group had decided to bail out, took 28K loss on the single contract.
I decided to hold BABA position till expiry, if assigned, I will take shares and sell OTM call to low the cost base. I do have bullish bias for BABA in the long term.
I will keep update this position as the event unfold.
Updates.
30 Dec, 2020
The second day after news release, BABA had strong rally back, I entered bullish put spread was 50% profit after just 2 days. The long term look it may fill the gap and return to 246 level. I have also entered long butterfly and Iron condor for long term play.
1. Always allocate your investment carefully, not more than 2% of your total capital in any of position;
2. Keep at least 30% in cash and free up buying power to maneuver the unforeseen event;
3. Don't panic exit your position, following the trade managing rules, for event like this, while many other traders may exit their positions, it may be good opportunity to enter contrarian trades.
4. Always place some form hedge when there is no danger to be seen.
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