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Option Trading - Sell Covered Call Option on Alibaba Stock (BABA)

22 Jul 2025  Selling Covered Call Option for monthly Cash Generation, see following details:

  • Option Expiration Date: 21 Nov 2025 

  • Strike Price: $170

  • Premium Collected: $195 ($1.95 per share, or $195 per contract since 1 options contract = 100 shares)

  • Stock Price: 118.52

  • Stock Cost basis: 152 (I had own 100 x Baba share @ 152 Cost basis)  With 100 shares, i can sell 1 Covered call contract.

  • Remarks: Don't sell naked Call option, unlimited potential loss if BABA spikes well above $170.

Scenario 1. BABA closes below $170

  • The option expires worthless.

  • You keep the entire $195 premium.

  • No shares are called away.

Scenario 2. BABA closes above $170

  • The option will likely be exercised.

  • You must sell 100 BABA shares at $170.

  • Your effective sale price = $170 + $1.95 = $171.95 (including premium).

  • Effective Profit: (170-152+1.95) = 19.95 per share. 

  • If you don’t own the shares, this becomes a naked call, and you'd have to buy BABA at market price and sell at $170 → unlimited risk.


Here's a snapshot of recent analyst forecasts (all represent 12-month targets):


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