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 - Grubhub Inc. (GRUB) – BUY
BUY Grubhub Inc. (GRUB) April 2020 $47-$50 in-the-money vertical BEAR put spread at $2.40
Opening Trade
4-7-2020
expiration date: April 17, 2020
Portfolio weighting: 10%
Number of Contracts = 39 contracts
This is a short-term trade that Grubhub won’t rise above $47 in 11 days – this is a short term trade that shares will trade sideways to down and is a bet that I am willing to make.
I didn’t like this company before the coronavirus because of poor unit economics and just because deliveries are higher for some doesn’t mean that will make up for the mass closure of many other restaurants.
Then there is the issue of a good chunk of customers avoiding deliveries altogether preferring to source from supermarkets to keep costs down because many Americans are running out of money as we speak.
Splurging on a $20 steak plus tax and delivery costs will become a rarer occasion as we move deeper into the shutdown phase and the death toll spikes.
This company is the manifestation of a super charged U.S. economy intertwined with cheap debt that assumes consumers have ample disposable income to throw at food deliveries, and now that the economy, world, and social behavior have changed remarkably in 4 weeks, this company will not flourish even with a surge of McDonald’s and KFC orders.
Markets still wreak of volatility and I would recommend exiting this position on the next major swan dive as markets gyrate my 7-10% on a normal basis.
Conversely, we will cut losses on any major move up.
Another note - let me remind readers that it is impossible to call the tops and bottoms of these wild swings, unfortunately, Grub hit $43.50 this morning offering probably the best price of the day, this trade makes sense in its current form but please exercise caution and understand that since algorithms cannot even call tops and bottoms, a better price could come about the next day or two.
This is not the time to bet the ranch – capital preservation is the phrase of the day.
If you don’t do options, stand aside.
Only use a limit order. DO NOT USE MARKET ORDERS UNDER ANY CIRCUMSTANCES.
Simply enter your limit order, wait five minutes, and if you don’t get done, cancel your order and lower your offer by ten cents with a second order.
Here are the specific trades you need to execute this position:
Buy 39 April 2020 (GRUB) $50 put at………….………$8.20
Sell short 39 April 2020 (GRUB) $47 put at………….$5.80
Net Cost:……………………..............…….………..…….....$2.40
Potential Profit: $3.00 - $2.40 = $.60
(39 X 100 X $.60) = $2,340 or 23.40% in 11 days
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.
