Position Closed in Alibaba Group Holding Ltd

This morning, the Covered Calls Advisor decided to close the existing Alibaba Group Holding Ltd ( ticker symbol BABA) Covered Calls position. The next quarterly earnings is tomorrow morning and it was determined that not holding the position on the earnings date was the most prudent decision, so the position was closed out.   There is a relatively high degree of uncertainty with this earnings report since the straddle price indicates a likely stock price move of about 7% up or down after the release.  The recent earnings report from JD.com included less than expected customer traffic statistics which heightens concerns related to Alibaba's results.  In addition, since the Covered Calls Advisor believes we are most likely near a market top (see link) and the Overall Market Meter outlook is Slightly Bearish, I am temporarily continuing to increase the cash position (held in a money market fund at about 2.3% yield) in the Covered Calls Advisor Portfolio pending greater clarity on trade negotiations and corporate earnings outlooks.  Despite these uncertainties, since Alibaba is a core holding of the Covered Calls Advisor, it is likely that a new, conservative Alibaba Covered Calls position will be established within a few days after tomorrow's earnings report. 

As detailed below, the result was a +13.3% absolute return-on-investment (equivalent to +36.6% on an annualized basis) for the 133 days that this position was held.


Alibaba (BABA) -- Covered Calls Position Closed

The transactions were as follows:
01/01/2019 200 BABA shares owned at $137.07 per share
01/07/2019 2 Jan 18, 2019 $145.00 short Call options sold at $2.09 per share
01/18/2019 Bought-to-Close 2 Jan 18th $145.00 Calls @ $11.22
01/18/2019 Sold-to-Open 2 Feb 15th, 2019 $155.00 Calls @ $7.47
Note: the price of BABA stock was $156.24 when this roll out and up transaction occurred.
02/15/2019 Bought-to-Close 2 Feb 15th $155.00 Calls @ $11.15
02/15/2019 Sold-to-Open 2 Mar 15th, 2019 $160.00 Calls @ $9.05
Note: the price of BABA stock was $166.10 when this roll out and up transaction occurred.
03/15/2019 Bought-to-Close 2 Mar 15th $160.00 Calls @ $20.34
03/15/2019 Sold-to-Open 2 Apr 18th, 2019 $170.00 Calls @ $12.51
Note: the price of BABA stock was $180.29 when this roll out and up transaction occurred.
04/18/2019 Bought-to-Close 2 Apr 18th $170.00 Calls @ $16.79
04/18/2019 Sold-to-Open 2 May 17th, 2019 $175.00 Calls @ $14.45
Note: the price of BABA stock was $186.77 when this roll out and up transaction occurred.
05/14/2019 Unwound the Alibaba Buy/Write position by simultaneous transaction to Buy-to-Close 2 BABA May 17th, 2019 $175.00 Call options and Sell 200 BABA shares
Note: the share price was $174.02 and the Call options were bought-to-close at $4.52 per share


The overall performance result (including commissions) was as follows:
Cost Basis: $27,414.00
= $137.07 per share value at end of December, 2018 * 200 shares

Net Profit Components:
(a) Options Income: -$3,726.84
= ($2.09 - $11.22 + $7.47 - $11.15 + $9.05 -$20.34 +$12.51 -$16.79 +$14.45 -$4.52) * 200 shares - $36.84 commissions
(b) Dividend Income: +$0.00 
(c) Capital Appreciation (BABA stock sold at $174.02 per share): +$7,385.05
= ($174.02 -$137.07) * 200 shares - $4.95 commission

Total Net Profit: +$3,658.21
= (-$3,726.84 options income +$0.00 dividend income +$7,385.05 capital appreciation)

Absolute Return: +13.3%
= +$3,658.21/$27,414.00
Equivalent Annualized Return: +36.6%
= (+$3,658.21/$27,414.00)*(365/133 days)