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 - DocuSign, Inc. (DOCU) – SELL – TAKE PROFITS
SELL DocuSign, Inc. (DOCU) April 2020 $67.50-$72.50 in-the-money vertical BULL call spread at $4.95
Closing Trade
4-6-2020
expiration date: April 17, 2020
Portfolio weighting: 10%
Number of Contracts = 22 contracts
We have accrued 94.4% of the maximum profits for this deep-in-money call spread on just the 2nd trading day.
The Nasdaq index tanked last Friday as I put this call spread on and DocuSign shares slid 3% into the close, but it’s all green this morning (Nasdaq index up 5%) as DocuSign shares spike over 11% offering my readers a great time to cash in.
The spike has been dramatic and true to my word, we are taking profits as the tech market still has oversized risk premiums creating truly breathtaking price action.
This was a short-term deep in the money call spread that DocuSign wouldn’t drop below the strike price of $72.50 in 15 days – we finally found an optimal entry point into a premium coronavirus tech stock.
I have been outwardly bullish on this digital signature cloud product that has jumped to the forefront now that business is conducted on lockdown.
The price action has been nothing short of glorious (up 10% in the past month and now 20% after this morning’s spike up) in the era of the coronavirus and as not all tech stocks are created equal, it’s time to jump into this one considering shares have dropped 3% this morning on a bout of weakness.
Why did this trade look appetizing?
Shares have come down to earth after hitting $93 and have technical support at $67.
Even though there will be expected heightened volatility because of the uncertainty and terrible unemployment numbers, as long as the coronavirus is twisting in the wind wreaking havoc in the U.S., this stock will exhibit strength.
Honestly, I am shocked that the tech market has held up so well in the face of ghastly data, which is an incredibly bullish short-term signal.
Be aware that DocuSign is not one of those slow burners and there is still volatility in this stock because it is considered a growth stock to many investors.
If there is a quick bump up in shares, I took profits and I am now inclined to look for some short-side positions because we aren’t out of the woods yet with main street getting clobbered even though the state has taken care of corporate America quite tidily.
Only use a limit order. DO NOT USE MARKET ORDERS UNDER ANY CIRCUMSTANCES.
Here are the specific trades you need to execute this position:
Sell 22 April 2020 (DOCU) $67.50 call at…………..............………$20.65
Buy to cover short 22 April 2020 (DOCU) $72.50 call at………….$15.70
Net Proceeds:……………………..…..............….………..…..................….....$4.95
Profit: $4.95 - $4.10 = $0.85
(22 X 100 X $.85) = $18.70 or 18.70%
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.
