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.
Trade Alert - (AMZN) – TAKE PROFITS
SELL the Amazon (AMZN) April 2018 $1600-$1650 in-the-money vertical BULL CALL spread at $49.90 or best
Closing Trade - For Tech Letter Subscribers Only
4-15-2019
expiration date: April 18, 2019
Portfolio weighting: 10%
Number of Contracts = 2 contracts
Three weeks ago, I went out on a limb and bet big time that the new Fed ultra-dovishness will drive investors into the big tech stocks one more time.
What happens when QE comes back? You buy the QE beneficiaries of old. That includes technology stocks, especially Amazon (AMZN).
I was right.
Since I added this position on March 25, Amazon has climbed another $100.
Therefore, I am selling the Amazon (AMZN) April 2018 $1600-$1650 in-the-money vertical BULL CALL spread at $44.50 or best. This was a bet that (AMZN) would not trade below $1,650 by the April 18 options expiration in 14 trading days.
If you can’t get done at $49.90 keep moving you limit down ten cents at a time until you are. Alternatively, you can keep the position for four more days and collect the entire $50.00 on Friday, hoping that another 9/11 type event doesn’t happen before then.
By coming out here you get to earn $1,080, or 12.13%, in 11 trading days.
With only four more days until the April 18 option expiration the risk/reward of continuing is no longer favorable.
If you own the stock outright keep it. Amazon has a double in it over the next three years. (AMZN) easily has a double in it over the next three years.
Here are the specific trades you need to execute to exit this position:
Sell 2 April 2019 (AMZN) $1,600 calls at………….………$245.00
Buy to cover short 2 April 2019 (AMZN) $1,650 calls at….$195.10
Net Proceeds:………………………….………..………….….....$49.90
Profit: $49.90 - $44.50 = $5.40
(2 X 100 X $5.40) = $1,080 or 12.13% in 11 trading 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.
