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.
Tech Alert - Stitch Fix, Inc. (SFIX) – SELL – TAKE PROFITS
SELL Stitch Fix, Inc. (SFIX) April 2020 $15-$18 in-the-money vertical BEAR put spread at $2.93
Closing Trade
4-1-2020
expiration date: April 17, 2020
Portfolio weighting: 10%
Number of Contracts = 38 contracts
This was a short-term trade that online clothing company Stich Fix wouldn’t rise above the $15 strike price in 19 days.
We have accrued 84% of the maximum profits in this put spread as Stich Fix opened up 5% to the downside this morning, and markets are so volatile that it’s better to take profits than be sorry the next day.
The bottom fell out as expected as much of the negative news and the fallout out from it hasn’t been entirely priced into the tech market and that also goes for clothing tech.
Volatility is still abnormally high and the retracement from the “sell anything at any price” storm has subsided.
The ensuing credit crunch that will lead into a larger solvency crisis for selected tech firms hasn’t even been discussed yet and that is likely in the cards.
Tech firms are still scratching their heads at what just happened and businesses like Stich Fix is suddenly deemed irrelevant as the sudden tech climate has morphed into an Amazon, Walmart, Costco, Target kind of world.
The garment industry worldwide is facing mass cancelations from buyers and factories in Asia are confronting widespread job loss.
This is the canary in the coal mine for clothing tech and even though SFIX has some fancy algorithms matching bespoke clothing wardrobes with the styles and tastes of the customer, this service is literally the last thing people need when 1/3 of the country is in lockdown.
The recent price action in SFIX shares has been poor with any little bounce met with selling, and this “rip your face off” sell-off which I expected is the optimal time to take profits.
Only use a limit order. DO NOT USE MARKET ORDERS UNDER ANY CIRCUMSTANCES AND DO NOT BUY THE STOCK.
Here are the specific trades you need to execute this position:
Sell 38 April 2020 (SFIX) $18 put at………….…..............……$5.90
Buy to cover short 38 April 2020 (SFIX) $15 put at………….$2.97
Net Proceeds:……………………..…….………..…….....................$2.93
Profit: $2.93 - $2.55 = $0.38
(38 X 100 X $.38) = $1,444 or 14.44%
To see how to enter this trade in your online platform, please look at the order ticket below, 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 a Vertical Bull Call Spread” by clicking here at
http://www.madhedgefundtrader.com/ltt-vbpds/
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 on expiration months farther out.
Keep in mind that these are ballpark prices at best. After the alerts go out, prices can be all over the map.
To see how to enter this trade in your online platform, please look at the order ticket below, 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 a Vertical Bull Call Spread” by clicking here.
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 on expiration months farther out.
Keep in mind that these are ballpark prices at best. After the alerts go out, prices can be all over the map.
