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 - (ROKU) – SELL-STOP LOSS
SELL the Roku (ROKU) December 2018 $30-$35 in-the-money vertical BULL CALL spread at $4.00 or best
Closing Trade
12-13-2018
expiration date: December 21, 2018
Portfolio weighting: 10%
Number of Contracts =23 contracts
Roku has been hugging the upper $35 strike far too long for me to keep the position.
I am therefore selling the Roku (ROKU) December 2018 $30-$35 in-the-money vertical BULL CALL spread at $4.00 or best.
We had a chance to take profits in this position many times in the one month we have held it, I was inclined to run it into expiration. However, I did not expect the onset of the most extreme market conditions in history.
This morning, the AAII Survey showed that 20.9% of traders were bulls while 48.9% were bears. This is one of the most bearish readings on record and usually signals some sort of turning point.
The risk/reward ratio here is no longer favorable, especially if we get another out of the blue meltdown. Capital preservation is the name of the game now.
If you have the stock, keep it. This is a great entry point for the best set top box streaming play in the entire market. I just don’t know what it is going to do for the next 5 days.
Here are the specific trades you need to execute this position:
SELL 23 December 2018 (ROKU) $30 calls at………….…$5.40
Buy to cover short 23 December 2018 (ROKU) $35 calls at….$1.40
Net Cost:………………………….………..………….….....$4.00
Loss: $4.35 - $4.00 = -$0.35
(23 X 100 X -$0.35) = -$805
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.
