Buying BABA call contracts.

Alibaba Group (BABA) is a Chinese online and mobile commerce company that has been under pressure in the wake of Chinese regulations.

While the regulatory environment has been a major concern, BABA is an extremely profitable company. And now the stock trades for a very reasonable multiple.

As the market begins to rebound, Chinese media stocks like BABA have a lot of room to trade higher. Even just recovering half of the losses from BABA’s 2-year selloff would represent a triple-digit gain from current levels.

Shares appear to have found support above $80 with plenty of room for a bounce.

Buying in-the-money call contracts gives us a chance to profit from any positive movement for BABA over the next 3 weeks. Meanwhile, these call contracts should retain some extra value even if the stock continues its recent decline.

*An earlier version of this alert recommended the $80 calls – That was a mistake. The model has purchased the May 20th $85 calls @ $9.00