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 - (AAPL) – SELL - STOP LOSS
SELL the Apple (AAPL) February 2019 $125-$135 in-the-money vertical BULL CALL spread at $8.70 or best
Closing Trade
1-4-2019
expiration date: February 15, 2019
Portfolio weighting: 10%
Number of Contracts = 12 contracts
I am going to use the 653 point rally this morning to dump my highest risk position, and that would be Apple (AAPL).
On Wednesday, the company issued probably the worst pre-earnings announcement in history, thanks to falling iPhone sales in China. Some $100 billion in Apple market capitalization vaporized.
When Armageddon hits and you can still get out close to even, you take that all day long. Such are the merits of my option call spread strategy. Your downside protection is enormous at the cost of some upside.
This gives me dry powder with which to buy Apple again on the next downside swoon. An Apple March $100-$110 vertical bull call spread anyone?
I am therefore selling the Apple (AAPL) February 2019 $125-$135 in-the-money vertical BULL CALL spread at $8.70 or best
This was a bet that Apple (AAPL) will not trade below $135 by the February 15 option expiration day in 29 trading days.
The lower strike is an eye-popping 42.30%, or $99 lower than the October high. Yes, the world’s largest company would have to drop by almost half in value for us to lose money on this trade. That seems highly unlikely.
If you have the stock, keep it. At a PE multiple of only 12, it is a great long-term hold. The stock is insanely cheap here.
Here are the specific trades you need to exit this position:
Sell 12 February 2019 (AAPL) $125 calls at…….....…….………$23.65
Buy to cover short 12 February 2019 (AAPL) $135 calls at….$14.95
Net Cost:……………………..…….………..………….…................. ....$8.70
Loss: $8.70 - $8.60 = $0.10
(12 X 100 X $0.10) = $120, or 1.16% in two 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.
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.