Alibaba (BABA) will make its public debut on Friday on the NYSE and will likely be the biggest IPO ever. However, like most IPOs, BABA won’t trade options right away, which means I won’t be targeting a Momentum Options trade in the stock until its first options chains are available.
Most smaller players in the game won’t be getting a piece of the IPO, but that doesn’t matter. The options on Alibaba will likely price next week, and I am more interested in trading the options on the stock than the stock itself. (The Chicago Board Options Exchange said it expects to start listing BABA options on Sept. 29.)
Of course, the option premiums are going to be juiced, and there are no technical patterns to chart, so it may be a few weeks before I possibly trade them. However, at some point down the road there will be an options trade on BABA, either bullish or bearish, as shares will likely trade up to $105 or down to $35 by year-end.
That may sound like a bold prediction, but if shares close Friday’s session at $70, this would represent a 50% move in one direction or the other. Facebook (FB) and Twitter (TWTR) made similar moves following their IPOs.
Of course, I’ll be watching BABA’s charts and doing a lot of research on this shiny new name in the coming weeks, and I’ll start digging for options trading opportunities in BABA toward the end of the month. Remember, though, it’s just as likely those trades could be in bearish put options, depending on how the hype for BABA plays out.
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