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 - (MSFT) – TAKE PROFITS
SELL the Microsoft (MSFT) October, 2018 $105-$108 in-the-money vertical BULL CALL spread at $2.90 or best
Closing Trade
10-9-2018
expiration date: October 19, 2018
Portfolio weighting: 10%
Number of Contracts = 38 contracts
Microsoft (MSFT) today announced that it was bidding for a $10 billion Defense Department contract that will require a large expansion if its Azure cloud infrastructure, causing the stock to pop 2%.
I am therefore taking profits on my position in the Microsoft (MSFT)October, 2018 $105-$108 in-the-money vertical BULL CALL spread at $2.90 or best. The risk reward of continuing the final seven days until the October 19 option expiration is no longer favorable.
Suddenly, technology is no longer as safe as it used to be, And today, Morgan Stanley put out a research peace saying that technology is dead due to valuation reasons.
In this heightened risk environment discretion is the better part of valor.
By coming out here you earn a very respectable 9.43%, or $950 profit in only eight trading days. Well done, and on to the next trade.
This was a bet that (MSFT) would not trade below $108 by the October 19 option expiration day in 14 trading days. We are currently trading at $112.98. Notice that I went very short dated and deep in-the-money to minimize my risk.
If you don’t do options, close your eyes and buy Microsoft shares outright. It’s going to new all-time highs, possibly double from here.
Here are the specific trades you need to execute this position:
Sell 38 October 2018 (MSFT) $105 calls at…….………$8.35
Buy to cover short 38 October 2018 (MSFT) $108 calls at….$5.45
Net Proceeds:………………………….…………..…….…
Profit: $2.90 - $2.65 = $0.25
(38 X 100 X $0.25) = $950 or 9.43% in 8 trading days.
To see how to enter this trade in your online platform, please look at the order ticket above, which I pulled off of Interactive Brokers.
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Please keep in mind that these are ballpark prices only. There is no telling how much the market can move by the time you get this.
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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 close to expiration.
If you don’t get it done, don’t worry. There are another 250 Trade Alerts coming at you over the coming 12 months.