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 - ARK Innovation ETF (ARKK) – TAKE PROFITS
SELL the ARK Innovation ETF (ARKK) July 2022 $49-$54 in-the-money vertical BEAR PUT spread at $4.05
Closing Trade
7-8-2022
expiration date: July 15, 2022
Portfolio weighting: 10%
Number of Contracts = 25 contracts
This was a tactical trade on Cathie Wood’s ETF ARK Innovation ETF (ARKK) that ARKK would not rise above $49 in the next 18 days.
The stock nosedived soon after we executed this position with the underlying stock ARKK sliding to $40, then investors sniffed out a looming recession and the “good news is bad news” narrative was thrust to the floor.
Since then, ARKK has gone from $40 to $47 quickly and we are able to take modest profits all due to time decay.
The last straw was ROKU’s strong reversal to the upside and it’s a good thing we executed a ROKU and META call spread after the sentiment shift.
The dovish talk by Fed members is helping supercharge the comeback in equities and I basically left ARKK as a hedge while my other positions gained.
The sentiment could continue which is why we need to take profits here before the underlying stock quickly takes out our lower strike in the bear put spread.
Traders need to be highly tactical today in trading, this is not your father’s market where you just go long and go take a nap.
The liquidity sentiment has never been more important today as the market is so leveraged that swings filter into elevated volatility.
Being nimble is the call of the day, and long term, I would not hold ARKK.
We essentially are getting out of ARKK with a slight profit and substituting it with a ROKU call spread exploding to the upside. I’ll take that for sure. ROKU is up another 3% this morning after a stellar yesterday.
Here are the specific trades you need to exit this position:
Sell to Close 25 July 2022 (ARKK) $54 puts at….………$6.60
Buy to Close 25 July 2022 (ARKK) $49 puts at………….$2.55
Net Proceeds:………………........……..…….………..…….....$4.05
Profit: $4.05 - $3.95= $.10
(25 X 100 X $.10) = $250 or 2.53%
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.
