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 - Shopify Inc. (SHOP) - BUY
BUY the Shopify Inc. (SHOP) December 2020 $950-$955 in-the-money vertical BULL call spread at $4.25
Opening Trade
12-9-2020
expiration date: December 18, 2020
Portfolio weighting: 10%
Number of Contracts = 23 contracts
Only use a limit order. DO NOT USE MARKET ORDERS UNDER ANY CIRCUMSTANCES.
I’m going to use this 5-6% dip in Shopify to take a stab at a short-term bullish trade.
This is a short-term trade that underlying shares of Shopify Inc. (SHOP) will stay above $955 by the December 18th expiration date.
I believe Shopify shares will benefit from positive headlines about the domination of their e-commerce business going into the new year.
With SHOP being the Canadian e-commerce market share leader, I believe it is the biggest beneficiary of the shelter-at-home trend which we are seeing again with the virus spreading like wildfire across the continental U.S.
SHOP has been trending sideways the past month and I am willing to bet that shares will hold up in the short-term through the holiday season and I’m using this short-term dip in shares to execute a deep-in-the-money call spread on Shopify.
This is a favorable trade with the heightened implied volatility giving us a bigger cushion to play with our deeper in the money spreads – please use limit orders when executing the spread in order to avoid price gouging by the market makers.
If underlying shares sink anywhere close to $955, cut your losses to live to fight another day.
Shopify has been a darling of the entire tech sector with its Teflon business model and this is a specifically defined trade with proper risk control.
For traders that want to add more beta, please move up the strike prices closer to at-the-money.
Here are the specific trades you need to execute this position:
Buy 23 December 2020 (SHOP) $950 call at………….………$97.40
Sell short 23 December 2020 (SHOP) $955 call at….……….$93.15
Net Cost:……………………..…….……........................…..…….....$4.25
Potential Profit: $5 - $4.25= $.75
(23 X 100 X $.75) = $1,725 or 17.25% in 9 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 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.
