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 - (CCL) -STOP LOSS
SELL the Carnival Cruise Lines (CCL) March 2020 $37.50-$40.00 in-the-money vertical Bull Call spread at $1.70 or best
Closing Trade
2-24-2020
expiration date: March 20, 2020
Portfolio weighting: 10%
Number of Contracts = 45 contracts
Norwegian Cruise Lines cancelling all Asian cruises for this year has certainly pulled the rug out from our Carnival Cruise Lines Trade. Suddenly, fears about a global Corona pandemic have gone, well, viral.
After weeks of turning a blind eye, poo-pooing, and wishfully ignoring the global Coronavirus pandemic, traders are finally getting a wake-up call.
It turns out that the prospect of a substantial portion of the world’s population dying horrible deaths over the next few months cannot be offset by quantitative easing after all.
At least for the short term.
This weekend, we learned that all Asian cruises have been cancelled. More factories in South Korea have been shut down for lack of Chinese parts. Technology conferences in San Francisco have been cancelled. Some 80% of all Chinese flights are grounded.
GM assembly lines in Michigan are slowing, both from missing parts and disappearing customers. And we have just learned that a section of Italy near Milan has been quarantined, thanks to a major outbreak there. You can almost hear the sound of the world’s economy grinding to a halt.
I am therefore selling the Carnival Cruise Lines (CCL) March 2020 $37.50-$40.00 in-the-money vertical Bull Call spread at $1.70 or best.
This was a bet that Carnival Cruise Lines (CCL) would not trade below $40.00 by the March 20 option expiration day in 22 trading days.
Here are the specific trades you need to exit this position:
Sell 45 March 2020 (CCL) $37.50 calls at………….….........……$3.00
Buy to cover short 45 March 2020 (CCL) $40.00 calls at…….$1.30
Net Proceeds:……………..…….………..………..................….….....$1.70
Loss: $2.20 - $1.70 = -$0.50
(45 X 100 X -$0.50) = $2,250 or 22.72%.
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.
