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 - (SQ) – STOP LOSS
SELL the Square (SQ) December 2018 $55-$60 in-the-money vertical BULL CALL spread at $3.20 or best
Closing Trade
11-20-2018
expiration date: December 21, 2018
Portfolio weighting: 10%
Number of Contracts = 23 contracts
It looks like Thanksgiving came early this year, especially the gutting and carving part, at least in terms of my positions.
The break of the 7,000 low in NASDAQ means that we are not double bottoming before a year-end rally, as I thought. It means we have one more leg to go, and THEN we get a yearend rally.
However, I am not inclined to bet my entire 2018 performance on this thesis. I am therefore cutting back risk.
I am surprised that stocks are doing a Dotcom bust repeat with a backdrop of such great earnings. I have been surprised before and I will be surprised again. It’s time to live to fight another day.
I believe that Square is the blue chip publicly listed fintech company in the market and has at least another 400% rise in the share price. They are steadily eating the lunch of the old-line legacy banks like Bank of America (BAC), Wells Fargo (WFC) and Citicorp (C). However NOW is not the time to own this highly volatile kind of stock.
I am therefore selling the Square (SQ) December 2018 $55-$60 in-the-money vertical BULL CALL spread at $3.20 or best
This was a bet that Square (SQ) will not trade below $60 by the December 21 option expiration day in 30 trading days.
If you bought the stock outright, keep it. This is an outstanding long term hold.
Here are the specific trades you need to exit this position:
Sell 23 December 2018 (SQ) $55 calls at………….………$8.35
Buy to cover short 23 December 2018 (SQ) $60 calls at…….$5.15
Net Loss:……………………..…….………..………….….....$3.20
Loss: $4.35 - $3.20 = -$1.15
(23 X 100 X -$1.15) = -$2,645.
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.
If you are uncertain on how to execute an options spread, please watch my training video on How to Execute Vertical Call and Put Debit Spreads by clicking here.
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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 done, don't worry. There are another 250 Trade Alerts coming at you over the coming 12 months.
