BABA: Three Option Strategies for Three Market Views
Author: Koen Hoorelbeke, Investment and Options Strategist
Date: July 9, 2026
Overview
Alibaba's US-listed shares experienced a significant decline of approximately 27% over the month leading up to July 8, 2026, before rebounding by about 11% on that date. This recovery was attributed to a $600 million settlement with the US Department of Justice and a court order that alleviated some legal pressures on the company. The article discusses three distinct options strategies tailored to different market outlooks regarding Alibaba's stock, particularly in light of upcoming catalysts such as earnings reports and legal hearings.
Market Context
As of July 8, 2026, Alibaba's stock closed at $108.97, following a low of $94.81 on June 26, 2026. The stock's volatility was noted to be elevated, with at-the-money implied volatility around 48%. The article emphasizes the importance of selecting the appropriate expiry date for options strategies, especially when multiple catalysts are present.
Option Strategies
1. Bullish View: Long Call Diagonal
This strategy is for traders who believe that Alibaba's stock will continue to rise due to the positive developments. Instead of buying a simple call option, which can be expensive, the long call diagonal strategy is proposed:
- Buy: 1 September 18, 2026, 110 call
- Sell: 1 August 21, 2026, 125 call
This structure allows the trader to benefit from the time decay of the short call while maintaining exposure to potential upside through the long call.
2. Range-Bound View: Iron Condor
For traders expecting Alibaba to remain stable through August, the iron condor strategy is recommended:
- Sell: 1 August 21, 2026, 90 put
- Buy: 1 August 21, 2026, 85 put
- Sell: 1 August 21, 2026, 125 call
- Buy: 1 August 21, 2026, 130 call
This strategy profits from the lack of movement in the stock price, as it captures premium from the elevated volatility without exposure to significant events.
3. Bearish View: Bear Put Spread
For those anticipating a decline in Alibaba's stock, a bear put spread is suggested:
- Buy: 1 September 18, 2026, 105 put
- Sell: 1 September 18, 2026, 90 put
This strategy allows traders to define their risk while positioning for a potential drop in the stock price, particularly if the legal issues remain unresolved.
Conclusion
The article concludes that the choice of expiry is crucial when multiple catalysts are present. Each strategy offers a different approach to managing risk and capitalizing on market movements, emphasizing the importance of understanding the underlying events that could impact stock performance.
Final Thoughts
Traders are reminded to conduct thorough due diligence and consider their unique financial situations before implementing any of the discussed strategies. The article serves as an educational resource rather than a direct trading recommendation.