BABA long entry price: 230.55, stop loss 224, target 260-270 range or before earnings report (max risk just under 1% of account)
QQQ short entry price: 331.5, stop loss 338.5, target 317.5 or when out of BABA (max risk 0.5% of account)
Combined max risk: 1.5% of account.
I usually don’t have hard stop losses on pairs trades, but these two stocks are quite volatile, so I’m using stops.
My BABA position dollar amount is about 50% more than QQQ (200 shares long BABA and 100 shares short QQQ). Since the BABA position is large and I want to avoid having larger losses from an unexpected gap down, I’m hedging the position with a short on QQQ. I plan to hold BABA until the next earnings report in about 3.5 weeks or until it hits my stop loss or profit exit.
I also started a long position in PRLD since Baker Bros are in it and it’s had a large pullback. I don’t have a stop loss, but my max loss if the stock goes to 0 is 0.5% of my account. I plan to average down near 30 if it reaches that price to get close to a full position.
I’ll post charts of these 3 positions later today or tomorrow (I’ll edit this post), so be sure to check back sometime later!
BABA daily chart below. I took the loss today and exited both BABA (-.7% of account) and QQQ (roughly even).
QQQ daily chart below. I’m out of the short today for roughly breakeven. It was used as a hedge against BABA.
PRLD daily chart below. Plan to average down near 30.