The Chinese internet stocks such as BABA and BIDU have been white hot since the beginning of August. Their IVs had been pushed down as a result which is why I went long a put calendar in BABA.
BABA enjoyed a run from $85 to $100 in August. On August 19, I opened a long put calendar (short September 16, long October 21) with a strike of $95. At the time, BABA was trading at ~$97. I was looking for a down tick and a volatility bump in BABA. Since the trade open, BABA has only continued its ascent to $104, but oddly, IV has increased. Over the past two trading days, BABA has cooled down to $99 and IV has remained relatively high putting this spread back in the green for me. With one more week remaining on the short leg of the spread, I'm really looking for BABA to return to the mid-$90s.
Position summary:
August 19: BOT Sept/Oct 205 put calendar for $1.44
September 12: SOLD @ $1.73
I sold this position shortly after the market opened as I feared a bounce back in the general market and a drop in volatility.
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