Quarterly Outlook
Equity outlook: The high cost of global fragmentation for US portfolios
Charu Chanana
Chief Investment Strategist
Investment and Options Strategist
June 2025 brings Alibaba (BABA) into focus for cautious investors: the company has declared a new dividend, posted strong earnings, and is seeing its share price swing on regulatory headlines. With option premiums higher than usual, two conservative strategies—covered calls and cash-secured puts—can help investors generate extra income or buy BABA shares at a lower price.
Important note: the strategies and examples provided in this article are purely for educational purposes. They are intended to assist in shaping your thought process and should not be replicated or implemented without careful consideration. Every investor or trader must conduct their own due diligence and take into account their unique financial situation, risk tolerance, and investment objectives before making any decisions. Remember, investing in the stock market carries risk, and it's crucial to make informed decisions.
The following sections explain each strategy on its own. You can choose either approach independently, based on your goals and portfolio—there’s no need to use both together.
Who is this for?
You already own at least 100 shares of BABA and would consider selling them at a higher price, in return for extra income now.
How it works:
Who is this for?
You have cash and want to buy BABA only if the price falls to $113 by 20 June. You’re happy to get paid for waiting, or to own the shares at a discount.
How it works:
Strategy | What you do | If BABA ends above strike at expiry | If BABA ends below strike at expiry | Net effect (approx.) |
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Covered call | Sell $128 call on shares you own | Shares sold at $128, keep premium and dividend | Keep shares, keep premium and dividend | Max gain = (128 − 120.20) × 100 + $129 + dividend. If not assigned, keep premium/dividend and try again. |
Cash-secured put | Sell $113 put, hold €11,300 cash | Keep premium, no shares bought | Assigned 100 shares at $113, less premium | Max gain = $122 premium. If assigned, buy at $111.78 (strike − premium), lower than current price. |
All figures based on market data as of 5 June 2025. See detailed scenarios above.
What if the share price moves sharply before expiry?
Your outcomes are predetermined: with the covered call, your upside is capped but you keep the premium; with the put, you must buy at $113 (or keep the premium if the option isn’t exercised).
Can I get out of the trade early?
Yes, you can buy back the option at any time. Depending on market moves, this may result in a loss or gain.
Why do I need to set aside the full cash amount for the put?
Saxo requires that you have enough cash in your account to cover the potential purchase of shares if you are assigned. This ensures your risk is limited to the amount you agree to invest.
Options strategies like covered calls and cash-secured puts can give long-term investors additional ways to put their portfolios to work—either by earning extra income on shares you already own or by buying quality stocks like Alibaba at a lower, pre-agreed price. These approaches are designed for investors who prefer transparency, simplicity, and control, with clearly defined risks and outcomes from the start.
At Saxo, we believe that adding carefully selected options strategies to your investment toolkit can help you manage market swings and pursue steady returns, even in uncertain times. Before you start, take the time to review your personal objectives, understand each scenario, and use the resources on our platform to learn more about how options can support your long-term goals.
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