Alibaba has doubled in the last year, and it has more room to run, says trader

Alibaba hit a new record intraday high on Thursday, and founder Todd Gordon says the stock will see even more new highs when it reports earnings next Thursday.

"The stock had been consolidating in September, October and right through the end of 2017," he said Thursday on CNBC's"Trading Nation." But in 2018, markets overseas are booming, he said. "We're seeing a nice push up."

This breakout of consolidation leads Gordon to believe the next leg up is upon us. He also noted that the stock broke above resistance at $190, which becomes support. He establishes this as a key level to watch into earnings.

To take advantage of the rising implied volatility, or the price of options, going into Alibaba, Gordon wants to make a bullish bet on the stock by selling a put spread. Specifically, he is selling the Feb. 2 weekly 192-strike calls and buying the Feb. 2 weekly 197-strike calls for $1.95 credit. This means that if Alibaba closes above $197 on Feb. 2 expiration, then Gordon would receive the $195 credit on the trade.

If Alibaba closes below $192 on Feb. 2 expiration, Gordon could lose $304. However, because Alibaba is already trading at $198.24, above the higher put strike level in Gordon's trade, he believes that the probability of the stock dropping by that much is small.

So far this year, Alibaba has soared about 15 percent.


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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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