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Earnings around the corner: how to use a cash-secured put to set your Alibaba buy price
Koen Hoorelbeke
Investment and Options Strategist
Summary: With Alibaba’s earnings just days away, volatility is on the rise - and that means richer option premiums. Here’s how a simple cash-secured put could help you lock in a better entry price on the stock, while collecting income along the way.
Earnings around the corner: how to use a cash-secured put to set your Alibaba buy price
With Alibaba’s quarterly earnings just days away, this could be an opportune moment to combine patience with potential income. A cash-secured put lets you set your ideal buy price for the stock and get paid while you wait — something that can be especially attractive when option premiums are elevated ahead of an earnings announcement.
Why this is timely
Alibaba is expected to release its results this Thursday, 14 August 2025. Earnings events often drive higher implied volatility in options markets, which can boost the premiums sellers receive. For long-term investors who are happy to own Alibaba at a discount, that means a chance to collect more income for taking on the obligation to buy.
What is a cash-secured put?
In plain terms, you choose a price you’re happy to pay for the stock (the strike) and sell a put option at that level. In return, you collect a premium.
If the stock stays above your strike price until the option expires, the contract typically lapses and you keep the premium. If it drops below, you’ll likely be assigned and buy the shares at the strike — ideally at a price you already liked.
You must reserve enough cash to cover the purchase. For example, selling one USD 115 put means you need USD 11,500 set aside (before fees).
The Alibaba example
Important note: The strategies and examples described are purely for educational purposes. They assist in shaping your thought process and should not be replicated or implemented without careful consideration. Every investor must conduct their own due diligence, considering their financial situation, risk tolerance, and investment objectives before making decisions. Remember, investing in the stock market carries risks, so make informed decisions.
We’ll use the USD 115 strike expiring 22 August 2025, drawn from the current options chain:
The mid-price is around USD 1.60, as shown in the trade ticket:
The numbers at a glance (assuming the option is held to expiration)
- Share price (approx.): USD 118
- Strike: USD 115
- Expiry: 22 Aug 2025
- Premium received: USD 160 (USD 1.60 × 100)
- Cash reserved: USD 11,500
- Breakeven: USD 113.40 (strike minus premium)
- Maximum profit: USD 160 if the stock stays above the strike
- Risk: Owning 100 shares at USD 115, less premium received
Note: All outcomes above apply only at expiration. Results differ if you close or adjust the trade earlier. Assignment can happen at any time before expiration.
What could happen after earnings
- Stock stays above USD 115 — You keep the full USD 160 premium and no shares are purchased. Only at expiration.
- Stock closes below USD 115 — You’re assigned and buy 100 shares at USD 115, for an effective cost of USD 113.40 after premium. Only at expiration.
- Stock falls sharply — You still buy at USD 115 and take the full drop below your net entry; the premium cushions the first USD 1.60 per share. Only at expiration.
Earnings announcements can cause sharp moves in either direction. The CSP approach can let you benefit from pre-earnings volatility while targeting a price you’re comfortable owning.
Why investors like this
Potential benefits
- Set your buy price below today’s market
- Collect income up front, potentially boosted by pre-earnings volatility
- Enter a position in a disciplined way
Risks to consider
- You could be assigned into shares if the stock drops sharply
- You miss out on further upside if the stock rallies beyond the premium collected
- Requires keeping the cash reserved until the trade is closed or expires
Yield snapshot (for illustration)
- Yield on cash reserved: ~1.39% over about 10 days (160 ÷ 11,500)
- Annualised figures look higher, but this is purely mathematical — not a forecast, and it ignores market moves, early assignment, and trading costs
How to place and manage it
- Open Alibaba (BABA) in your platform and view the options chain.
- Select a strike you’d be happy to own at — here, USD 115.
- Choose an expiry after the earnings date — here, 22 Aug 2025.
- Sell the put at a limit price near the mid.
- Monitor the position; you can buy it back to lock in gains, roll to a later date, or take assignment if the stock falls.
Quick FAQ
What does “secured” mean? You’ve set aside enough cash to buy the shares if assigned.
Could losses exceed that? No, but shares can decline further after you purchase them.
When can assignment happen? Any time before expiration.
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This material is marketing content and should not be regarded as investment advice. Trading financial instruments carries risks and historic performance is not a guarantee of future results.
The instrument(s) referenced in this content may be issued by a partner, from whom Saxo receives promotional fees, payment or retrocessions. While Saxo may receive compensation from these partnerships, all content is created with the aim of providing clients with valuable information and options..
The instrument(s) referenced in this content may be issued by a partner, from whom Saxo receives promotional fees, payment or retrocessions. While Saxo may receive compensation from these partnerships, all content is created with the aim of providing clients with valuable information and options..
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