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 - Applied Materials, Inc. (AMAT) – TAKE PROFITS
SELL Applied Materials, Inc. (AMAT) April 2023 $105-$110 in-the-money vertical BULL CALL spread at $4.30
Closing Trade
4-5-2023
expiration date: April 21, 2023
Portfolio weighting: 10%
Number of Contracts = 25 contracts
This was a short-term aggressively bullish trade on chip firm Applied Materials, Inc. (AMAT) that AMAT would stay above $110 in the next 31 days.
Taking a 4-week view, I believe that the tech rally has run out of steam.
AMAT is down around 3% this morning and even though it’s a bitter pill to swallow to sacrifice higher profits, nobody ever went broke by taking a profit.
The March tech rally was swift and ferocious and has done wonders for the tech portfolio.
Moving forward, I expect volatility to stay elevated and the deep disconnect between traders who are betting on a Fed rally and the Fed who continue to say they are committed to fighting inflation will eventually solve itself as the market will re-price itself.
If the Fed indicates more hawkish behavior, we could get a violent pullback in tech.
Here are the specific trades you need to exit this position:
Sell to Close 25 April 2023 (AMAT) $105 calls at………….………$12.40
Buy to Close 25 April 2023 (AMAT) $110 calls at………..........….$8.10
Net Proceeds:……………………..…….………..…......................….....$4.30
Profit: $4.30 - $4.00 = $0.30
(25 X 100 X $0.30) = $750 or 7.50%
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.
