When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but, on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline.
Trade Alert - (SQ) – BUY
BUY the Square (SQ) December 2018 $55-$60 in-the-money vertical BULL CALL spread at $4.35 or best
Opening Trade
11-16-2018
expiration date: December 21, 2018
Portfolio weighting: 10%
Number of Contracts = 23 contracts
I believe that Square is the blue chip publicly listed FinTech company in the market and has at least another 400% rise in the share price. They are steadily eating the lunch of the old-line legacy banks like Bank of America (BAC), Wells Fargo (WFC) and Citicorp (C).
The shares have just suffered a cataclysmic 37.25% selloff in six weeks providing a rare entry point at a great price. It is also not a bad idea to go long into the November 29 G-20 summit in Buenos Aires, where rumors of a China deal with the US will be rife.
I am therefore buying the Square (SQ) December 2018 $55-$60 in-the-money vertical BULL CALL spread at $4.35 or best
This is a bet that Square (SQ) will not trade below $60 by the December 21 option expiration day in 30 trading days.
The lower strike is an eye-popping 46% lower than the October high. I am willing to bet that we won’t approach those number going into the December yearend rally. The stock is setting up a nice base here on the charts between the 50-day and 200-day moving averages.
Don’t pay more than $4.60 for this position or you’ll be chasing.
If you don’t do options buy the stock outright.
Here are the specific trades you need to execute this position:
Buy 23 December 2018 (SQ) $55 calls at………….………$16.00
Sell short 23 December 2018 (SQ) $60 calls at………….$11.65
Net Cost:……………………..…….………..………….….....$4.35
Potential Profit: $5.00 - $4.35 = $0.65
(23 X 100 X $0.65) = $1,495 or 14.94% in 29 trading days.
To see how to enter this trade in your online platform, please look at the order ticket above, which I pulled off of Interactive Brokers.
If you are uncertain on how to execute an options spread, please watch my training video on How to Execute Vertical Call and Put Debit Spreads by clicking here.
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Please keep in mind that these are ballpark prices only. There is no telling how much the market can move by the time you get this.
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The best execution can be had by placing your bid for the entire spread in the middle market and waiting for the market to come to you.
The difference between the bid and the offer on these deep in-the-money spread trades can be enormous.
Don't execute the legs individually or you will end up losing much of your profit. Spread pricing can be very volatile close to expiration.
If you don't get done, don't worry. There are another 250 Trade Alerts coming at you over the coming 12 months.